IndusInd Bank Q2 Review: Systematix Maintains 'Hold', Cuts Target Price — Here's Why

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Systematix Report

IndusInd Bank Ltd. has reported a net loss during the quarter of Rs 4.4 billion due to-

1. Accelerated provisioning due to persistent elevated MFI stress,

2. Contraction in margins led by lower MFI disbursements.

The Net interest margin was at 3.32%, down -14bps QoQ and -76bps YoY. The Yield on advances declined by -30 bps QoQ and by -99 bps YoY to 11.3%.

This was partially offset by a decline of -21bps QoQ in Cost of Deposits to 6.2%. The management expects the margins to improve once the disbursements in Micro Finance segment pick up.

The annualised gross slippage ratio increased by 4 bps QoQ and 99bps YoY to 3% in Q2.

The credit costs stood at 3.2%, up by 113 bps QoQ and 112 bps YoY. The bank made additional accelerated provision in the quarter amounting to Rs 8.46 billion owing to the persistent elevated stress in MFI segment due to which the provisions increased to Rs 26.2 billion, up 50.9% QoQ and 44.1% YoY.

The management stated that it expects the pace of accelerated provisions to decline going forward. We would continue to be watchful of the bank’s performance going forward and wait for signs of stability.

We continue to maintain our Hold rating for IndusInd bank with a revised price target of Rs 800 (Rs 840 earlier). We are valuing the bank at 0.9x on its FY27E book value per share of Rs 888.

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