IndusInd Bank Gets Another Target Cut As Bernstein Sees Management Credibility, Deposits As Top Concerns
Stock is considered cheap, however, pledged stocks, management credibility, deposit outflows, accounting issues and asset quality are the top five concerns, it said.
Bernstein has maintained its 'Outperform' rating for IndusInd Bank Ltd. but reduced its target price from Rs 1,300 to Rs 1,000. While the bank’s stock is trading at a low 0.8x trailing price-to-book multiple—appealing for a bank with an ROA above 1.5%, concerns about management, asset quality, and deposit stability have led to a downward revision in the target price.
Stock is considered cheap, however, pledged stocks, management credibility, deposit outflows, accounting issues and asset quality are the top five concerns and risks preventing investors from committing, according to the report on Tuesday.
Following recent disclosures, Bernstein has cut its financial year 2025E EPS estimate by 35%, reflecting one-time accounting impacts. Loan growth estimates for fiscal 2026E-27E have also been reduced, resulting in a 10% decline in EPS for those years.
This follows another large target price cut from CLSA, on lingering uncertainty over management continuity and persistent investor pessimism.
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The promoter group owns 15% of the bank, with 50% of this stake pledged, the brokerage said in its note. Combined with ongoing merger and acquisition transactions, this raises investor concerns. Bernstein believes increased transparency and completion of M&A could help alleviate this issue.
Asset quality problems and accounting discrepancies have damaged the credibility of the bank’s management. A notable reduction in the CEO and Deputy CEO’s stock holdings further weakened confidence. Bernstein suggests that appointing a new leadership team would restore investor trust.
Additionally, IndusInd Bank’s reliance on wholesale deposits exposes it to the risk of outflows, especially given concerns over its accounting practices. Bernstein emphasises that stability in deposit growth is crucial to easing these fears.
The bank faces accounting concerns related to hedges, with potential losses of Rs 2,100 crore. While Bernstein doesn’t anticipate a major increase, these issues create ongoing uncertainty.
While asset quality isn’t a major concern yet, Bernstein notes that the bank’s cheap valuation leaves room for potential credit losses. Performance in line with industry trends could address these worries in the future.
