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IndusInd Bank (IIB) reported largely in-line PAT at Rs22bn (up 22% YoY)/RoA at 1.9%, led by healthy credit growth/NII and lower LLP. Amid decelerating margins across banks, IIB retained NIM at ~4.3% in 2Q on the back of strong growth and better portfolio mix. Going ahead, IIB will continue focusing on retailization of its balance sheet, coupled with increasing share of secured mortgages, which should provide sustainability in growth, margins and asset quality in the long run. We believe the stock performance is largely tracking the bank’s strong credit growth, stable margins amid contraction among peers, and healthy asset-quality behavior with less exposure to unsecured loans (ex-MFI). Additionally, IIB is trading at reasonable valuations of 1.7x its FY25E ABV which, coupled with its robust return profile (RoA@1.9%/16-18% RoE over FY24-26E) and CET 1 at 16.3%, grants us confidence on the stock performance ahead. Promoters too are keen on increasing their stake in the bank and may look at capital infusion. We value the stock at 2x Sep-25E ABV and revise our TP to Rs1,825/sh (from Rs1,800). We retain BUY on IIB.

Strong growth, stable margins

Bank continues to clock strong credit growth at 21% YoY/5% QoQ, primarily led by healthy growth in the retail, SME/BB and corporate segments. However, deposits growth was relatively moderate at 14% YoY/4% QoQ, leading to LDR expansion. Retail deposits and deposits from small business customers continued to increase, coming in at 21% YoY/4% QoQ. CASA ratio slipped slightly to 39.3%. Nonetheless, the bank continued to report stable margins at ~4.3% due to strong credit growth, contained cost and better portfolio mix. Management retains its broad growth guidance range of 18-23% for FY24 as well as its focus on retailization of assets/liability, which should help sustain healthy margin/core-profitability.

Asset quality holds up well

Fresh slippages remain elevated at Rs14.7bn/2.3% of loans which, along with healthy recoveries/write-offs, led to stable GNPA ratio of 1.9%. IIB has further utilized the contingency provision in 2Q, with the outstanding now at Rs15.2bn/0.5% of loans. Notably, the bank has relatively lower exposure to unsecured loans and should thus be relatively less vulnerable to RBI intervention, if any, on its undeterred growth in the segment. 

We retain BUY, with revised TP of Rs1,825/share

We believe the stock performance is largely tracking the bank’s strong credit growth, stable margins amid contraction among peers, and healthy asset-quality behavior with less exposure to unsecured loans (ex-MFI). Additionally, the bank is trading at reasonable valuations of 1.7x its FY25E ABV which, coupled with its healthy return profile (RoA@1.9%/16-18% RoE over FY24-26E) and CET 1 at 16.4%, makes us constructive about the stock performance ahead. Promoters too are keen on increasing their stake in the bank, and may look at capital infusion. We retain BUY on IIB, with revised TP of Rs1,825/share, valuing the bank at 2x Sep-25E ABV. Key Risks: Slower-than-expected credit growth/asset-quality deterioration, on weak macros.

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