IndusInd Bank Q3 Review: In-Line Performance Aided By Stable Margins, Asset Quality

Stable margins and lower credit costs helped IndusInd Bank Ltd. report a 58% year-on-year jump in consolidated net profit during the September-December quarter, according to analysts.

The lender's net interest margin trajectory and improvement of asset quality in the vehicle finance and microfinance segments remain key monitorable, they said.

IndusInd Bank's consolidated net profit for the October-December quarter stood at Rs 1,963 crore. The lender's standalone net profit rose 69% year-on-year to Rs 1,959 crore in the third quarter of fiscal 2023. Analysts polled by Bloomberg estimated a net profit of Rs 1,885 crore for the quarter ended Dec. 31.

Consolidated net interest income, or core income, rose 18.5% from a year ago to Rs 4,495 crore. Deposits jumped 14% year-on-year in Q3 FY23 to Rs 3.25 lakh crore. The bank's CASA deposits grew 14% year-on-year to Rs 1.36 lakh core.

IndusInd Bank's consolidated advances jumped 19% year-on-year to Rs 2.72 lakh crore. The management sees a loan growth rate of 20–25%, according to its Q3 earnings conference call on Jan. 18.

The consolidated gross non-performing asset ratio fell 5 basis points sequentially to 2.06%. The bank's net NPA stood at 0.62% for the quarter, as compared to 0.61% last year. IndusInd's provisions for the quarter fell 35.6% year-on-year to Rs 1,064 crore.

While the analysts maintained an optimistic view about IndusInd Bank, the bank's elevated operating expenses and changes in the cost of funds were flagged as factors to keep an eye on.

Shares of the private lender declined 0.47% to Rs 1,217.2 apiece as of 10:15 a.m., while the benchmark Nifty Bank fell 0.22%.

Here's what the analysts had to say about HDFC Bank's financial performance in the October-December quarter:

ICICI Securities

• The bank's slippages are at a 9-quarter low and with improvement in collections, expect stress to further moderate.

• Revival in microfinance, some vehicle finance products, and growth in corporate loan book to power advances growth.

• Credit cost guidance of 1.2-15% through FY23 seems stretched.

• Cost to income ratio may go up to 44-44.2% before normalising to 41-43%

• Maintain 'buy' rating with a target price of Rs 1,420 per share

IDBI Capital

• Cost to income ratio remains stable due to higher operating expenses.

• Cumulative slippages from the restructured book in the first nine months of FY23 stood at Rs 1,833 crore.

• Bank's focus on sustainable growth should support re-rating.

• Maintain a 'buy' rating with a target price of Rs 1,630 per share.

Motilal Oswal

• Estimate that IndusInd Bank will deliver approximately 37% compounded annual growth rate in net profit over FY22-25.

• Outlook for credit costs remains controlled.

• In the consumer segment, growth was broad-based barring microfinance loans.

• Maintain a 'buy' rating with a target price of Rs 1,550 per share

Nirmal Bang

• Stable margins and lower credit costs aided IndusInd bank's profitability.

• Management expects higher slippages in microfinance segment during Q4 FY23.

• Maintain a 'buy' rating with a target price of Rs 1,405 per share