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Operating performance gaining traction; reiterates 1% FY27E exit RoA

* IndusInd Bank (IIB) reported a 1QFY27 PAT of INR10.4b (MOFSLe PAT: INR6.7b), attributed to healthy operating performance and one-off income of interest on IT refund of INR2.84b.

* NII grew 7% QoQ (1% YoY) to INR46.8b (6% beat). NIM expanded 18bp QoQ to 3.57%. However, adj. NIM contracted 4bp QoQ to 3.35%.

* Other income grew 4% QoQ (6% beat), while opex declined 2% QoQ/13% YoY to INR37.0b (5% lower than MOFSLe).

* Net advances rose 3.3% QoQ (down 2.2% YoY), led by strong momentum in the corporate book, while growth in VF and MFI remained muted. Deposits rose 3.7% QoQ (up 4.4% YoY), while CASA ratio dipped by 181bp QoQ to 29.4%.

* Fresh slippages declined 9% QoQ to INR16.6b. The GNPA ratio improved 18bp QoQ to 3.25%, while the NNPA ratio declined 5bp QoQ to 0.95%. PCR stood flat at 71.4%.

* We raise our earnings by 18%-19% in FY27/FY28E and project IIB’s RoA at 0.7%/1.0% for FY27E/FY28E. Reiterate Neutral with a revised TP of INR1,125 (based on 1.2x Mar’28E ABV).

Credit growth to track system growth in FY27E

* IIB reported 1QFY27 PAT of ~INR10.4b (vs. MOFSLe of INR6.7b), led by healthy operating performance and one-off interest on IT refund of INR2.84b.

* NII grew 7% QoQ (1% YoY) to INR46.8b (6% beat). NIM expanded 18bp QoQ to 3.57%, although adj. NIM contracted 4bp QoQ to 3.35%.

* Other income grew 4% QoQ (down 17% YoY, 6% beat), led by a pickup in business momentum. Opex declined 13% YoY/2% QoQ to INR37b on the back of lower statutory costs and improving operating leverage. C/I ratio, thus, declined to 57.1% vs. 62.3% in 4QFY26. PPoP growth stood at 8% QoQ at INR27.7b (24% beat).

* Provisions stood at INR13.8b (down 7% QoQ and 21% YoY, 4% miss), as slippages increased for VF owing to seasonality.

* The loan book rose 3.3% QoQ (down 2.2% YoY) to INR3.26t, led by growth in the corporate book (up 11% QoQ), while retail growth was flat QoQ. Within retail, VF growth was flat QoQ, and consumer banking rose 2% QoQ.

* The deposit book grew 3.7% QoQ (up 4.4% YoY) amid the bank’s focus on de-bulking large bulk deposits. CASA book declined 2.3% QoQ, leading to a 29.4% dip in CASA ratio. Retail deposit share stood at 49.5%.

* Fresh slippages declined 9% QoQ, led by improvement across segments, except for CV and MFI, owing to 1Q seasonality. Provisions, thus, declined 7% QoQ to INR13.8b. Asset quality ratios improved, with GNPA/NNPA declining 18bp/5bp QoQ to 3.25%/0.95%. PCR was flat QoQ at 71.4%

Valuation and view

IIB reported a healthy quarter, supported by healthy operating performance and one-off income. Consequently, RoA improved to 0.78% (0.63% adj. for one-off) from 0.45% in 4QFY26, with the bank maintaining the target of an exit RoA of ~1% by the end of FY27. Other income improved QoQ on the back of improving business momentum, while opex declined with lower statutory costs. NIM expanded 18bp QoQ to 3.57% (adjusted for one-off, NIM contracted 4bp QoQ to 3.35%). Business momentum picked up QoQ, led by strong growth in the corporate segment, while retail book growth remains muted. Deposit growth was driven by higher retail deposits, taking the retail deposit share to 49.5% of total deposits. The reduction in slippages was broad-based; however, slippages in the VF and MFI segments inched up due to seasonality, leading to a partial miss on our provision estimates for 1Q. The bank expects loan growth to broadly track industry growth in FY27, with potential to outpace the industry in FY28. We raise our earnings by 18-19% in FY27/FY28E and project IIB’s RoA at 0.7%/1.0% for FY27/FY28E. Reiterate Neutral with a revised TP of INR1,125 (based on 1.2x Mar’28E ABV).

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