IndusInd Bank Q3 Results Review - Balance Sheet Management The Key Monitorable: Prabhudas Lilladher

Prabhudas Lilladher Report

IndusInd Bank Ltd. saw a mixed quarter; while net interest margin at 4.84% was 11 basis points ahead of our estimate, asset quality was a miss due to higher slippages and buffer provisions were further utilised.

Deposit franchise continues to improve as registered transferable deposit share enhanced by 240 bps YoY to 44.8%. To fund existing run-rate of asset growth, deposit accretion should scale up to 16-17% YoY (~14% over FY22-24E), given bank would not like to surpass an loan-deposit ratio of 90%.

With banking system witnessing liquidity squeeze, either loan growth for IndusInd Bank will have to taper down or bank would resort to wholesale funding, which may affect margins.

Hence despite we factoring a 17% loan compound annual growth rate over FY24-26E and stable NIM, there are downside risks to our estimates.

While IndusInd Bank has guided to increase provision buffer by Rs 3 billion in near term, it again utilised Rs 2.2 billion in the quarter; we would prefer a higher provision buffer.

Maintaining multiple at 1.8 times, our target price increases to Rs 1,740 from Rs 1620 as we roll forward to March 2026. Retain 'Buy'.

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