IndusInd Bank Gains As Jefferies Ups Target On Growth In Retail Deposit
IndusInd Bank is among Jefferies’ top picks.
Shares of IndusInd Bank Ltd. gained after Jefferies raised its price target for the lender, citing a turnaround in earnings with better growth and lower credit costs.
The bank’s annual report for 2021-22 shows improvement in retail deposit franchise and ALM (asset and liability management) that is “helping narrow the gap in rates vs larger banks”, the research house said in an Aug. 24 report.
“We will watch out for progress here, especially when rates are rising and growth is improving. Non-performing loans fell and even as the bank partly used contingent provisions, it still carries enough buffer,” it said. “New initiatives on liabilities, corporate and rural banking can add longevity to turnaround in return on assets.”
IndusInd Bank is among Jefferies’ top picks. It reiterated ‘buy’ rating on the bank, and raised the target price from Rs 1,250 to Rs 1,330 apiece—an implied upside of 21.89%.
Other highlights from Jefferies’ report:
Jefferies upgraded its earnings estimates for the bank by nearly 2%, and estimates a turnaround over FY22-24.
It expects RoA to improve to 1.7% by FY24 from 1.2% in FY22.
It expects RoE to rise to 15% by FY24 from 10% in FY22.
But the dependence on wholesale funding is a key risk despite improvement in deposit franchise. While gross NPA ratio fell to 2.3% in FY22 from 2.7% in FY21, NPAs like infra and personal loans rose.
Shares of IndusInd Bank closed with nearly 3% gains. The stock was among the top gainers on the Nifty Bank. Of the 49 analysts tracking the company, 44 maintain a ‘buy’, four suggest a ‘hold’ and one recommends a ‘sell’, according to Bloomberg data. The average of the 12-month target price implies an 10.1% upside.
