IndusInd Bank On Track To Improve Liability Franchise, Asset Quality, Says Macquarie
Macquarie has maintained an 'outperform' rating on the lender with a price target of Rs 1,449 apiece.
IndusInd Bank Ltd. expects slippages to normalise in the next one or two quarters, according to Macquarie. The bank is showing improvement on the net interest margin front in the quality of the liability franchise, it said after meeting with the lender's management.
The management expects the liquidity pressure that is hampering resource mobilisation to ease after a rate cut that is expected in the second half of the next fiscal. This, in turn, will help narrow the gap between loan and deposit growth, the brokerage said.
The management also noted that, "given the strong credit demand in vehicle finance and microfinance, it expects its loan portfolio to grow 1.5 times the industry growth".
Macquarie has maintained an 'outperform' rating on the lender with a price target of Rs 1,449 apiece. "We believe the shares look cheap given the ROA trajectory," Macquarie said.
Asset Quality To Normalise
The bank saw higher than expected slippage than it guided for in the past two quarters due to slippage in microfinance, vehicle finance, LAP, agriculture, merchant banking and two corporate accounts, Macquarie said.
However, the management expects these slippages to normalise, and it said that it will create contingent buffers to strengthen the balance sheet while making sure profitability is maintained.
Outlook For Liability Franchise
Going forward, as retail deposits rise, the management expects to reduce the term deposit rate gap between the bank and its peers.
"The near-term focus is to reduce the share of the top 20 depositors, and the medium-term target is to improve the retail deposit mix to 50% from the current 45%," the report said, citing the management.
The company's management expects to improve it by increasing market share in home markets to 5% from the current 3.7%–3.8%, focusing on NRIs and affluent segments, focusing on select communities, and expanding branches.
In addition to this, the management also expects final approval from the RBI to allow promoters to increase their stake and operating leverage to play out in the medium term once investments in technology reduce.