IndusInd Bank's June quarter (Q1FY27) earnings strengthened the case that the lender's turnaround is gathering pace, but brokerages remain divided on how quickly that recovery can translate into sustained profitability.
Jefferies said the quarter showed encouraging progress across growth, asset quality and core profitability. Macquarie, on the other hand, remained cautious, arguing that pressure on margins and return ratios could continue even as asset quality improves.
The differing views underscore the debate surrounding the bank's recovery — whether improving fundamentals are enough to drive a re-rating or whether profitability still has some distance to cover.
ALSO READ: IndusInd Bank Q1 Results: Profit Jumps 47% As Provisions Decline; NII Up Marginally
Here's What Brokerages Said After The Results:
Jefferies
- Maintained Buy and raised the target price to Rs 1,250 from Rs 1,100.
- Said the June-quarter results indicate the bank is on track for improvements.
- Noted encouraging trends in loan growth, asset quality and core return on assets.
- Said core operating trends improved, supported by lower operating expenses and lower credit costs.
- Expects these improvements to continue over the next two to three years.
- Added that visibility on achieving a 1.5% return on assets will be the key catalyst for a re-rating.
Macquarie
- Maintained Underperform with a target price of Rs 625.
- Said asset quality improvement remains on track.
- Noted that profit after tax exceeded estimates, aided by lower credit costs.
- Expects net interest margins to remain under pressure.
- Said the bank's ambition to improve return on assets faces a demanding road.
IndusInd Bank Q1 Performance
IndusInd Bank reported a 46.5% year-on-year (YoY) increase in net profit to Rs 1,003 crore in the June quarter, while net interest income rose 1% to Rs 4,685 crore. Operating profit increased 1.2% to Rs 2,683 crore.
Asset quality improved during the quarter, with gross non-performing assets declining to 3.25% from 3.43% in the preceding quarter, while net non-performing assets eased to 0.95% from 1%. Provisions declined 9.7% sequentially to Rs 1,340 crore, helping reduce credit costs.
The bank said loan growth recovered sequentially, led by the wholesale segment, while microfinance asset quality improved materially and overall slippages declined. However, net interest margin (excluding one-offs) slipped to 3.35% from 3.39% due to a higher share of lower-yield wholesale loans. Vehicle finance witnessed seasonal pressure, though management said there were no signs of rising stress in the commercial vehicle portfolio.
Looking ahead, management expects credit growth to remain in line with the banking system during FY27, with retail, MSME and rural banking emerging as the primary growth engines.
It guided for some pressure on net interest margins in the second quarter but expects asset quality to improve further, supported by lower stress in the microfinance and personal loan portfolios.
The bank also plans to raise Rs 10,000 crore of capital to partly offset the impact of the expected credit loss framework and is targeting a return on assets of around 1% by the end of FY27.
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