Accumulate IndusInd Bank Ltd For Target Rs. 1,150 by Prabhudas Liladhar Capital Ltd
Balance sheet recalibration over; growth phase begins
IIB saw decent quarter; NII adjusted for IT refund (INR 2.8bn) was in-line. Fees and opex were better leading to core PPoP beat of 8.5%. With balance sheet recalibration largely completed (loan de-grew over Q4’25-Q4’26) bank is entering its growth phase with loans growing by 3.3% QoQ (mainly led by corporate). Stress in MFI has normalized with the book likely to grow in upcoming quarters; its share is 5% that is guided to reach 7%. Share of retail deposits (as per LCR) has enhanced to 49.5%, up 160/320bps QoQ/YoY. Owing to consistent improvement in earnings trajectory, we raise multiple to 1.2x from 1.0 on FY28 ABV and increase TP to INR 1150 from INR 960. Retain ‘ACCUMULATE’.
Stable quarter with beat on core PPoP due to tad better fees/opex: NII adjusted for IT refund was in-line at Rs43.9bn. NIM (calc.) was 3.47% (PLe 3.49%); adjusted for one-off reported NIM was down 4bps QoQ to 3.35%. Loan/deposit growth at -2.2%/4.4% YoY were in-line. CASA ratio was stable at 31.2% (31.2% in Q4’26). LDR was steady at 78.7% (78.9% in Q4’26). Other income was 3% higher at Rs17.9bn mainly due to slightly better fees. Opex at Rs37.9bn was 3.2% below PLe; higher staff cost was offset by lower other opex. Core PPoP at Rs21.85bn was 8.5% above PLe; PPoP was Rs26.8bn. GNPA was inline at 3.25% (PLe 3.24%). Slippages improved at Rs16.6bn (PLe Rs17.5bn); recoveries were at Rs4.7bn (PLe Rs4.3bn). Provisions as expected were Rs13.4bn. Core PAT was 24% above PLe at Rs6.3bn; PAT was Rs10bn.
Loan growth led by corporate: Credit growth was 3.3% QoQ led by corporate (+10.8%) that was broad based with large corporate, institutional banking & mid-market showing healthy traction. Due to seasonality, VF disbursals were muted while slippages inched up QoQ. Disbursals in traditional retail loan were up 18% QoQ, which were de-growing. Asset quality in MFI further improved, with key indicators such as slippages, CE and overdue levels normalizing. Gross slippages moderated to INR 1.9bn (INR 5.0bn in Q4’26). ~74% of the portfolio is covered under the CGFMU credit guarantee. The overall MFI book at is 5% of overall loans that is projected to be 7% of overall portfolio.
NIM has stabilised; further moderation in opex guided: NIM fell by 4bps QoQ, primarily due to shift in loan mix towards wholesale banking & secured retail assets and RIDF addition. NIM may face some pressure in Q2, recovering in H2’27 as high yielding businesses expand and loan mix improves. Other opex fell by 5% QoQ partly driven by a decrease in DICGC, PSLC and CSR and partly due to operating efficiencies.
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