IndusInd Bank Q1 net profit doubles; should you buy?

A strong comeback on deposits led from retail taking CASA (Current account saving account deposits) to 42% from 40% and growing by an average of 20%.

  • Money9
  • Publish Date - July 28, 2021 / 10:57 AM IST
IndusInd Bank Q1 net profit doubles; should you buy?

Shares of IndusInd Bank were trading 1.5% higher at Rs 995 in an otherwise weak market. This comes after the bank reported doubling its net profit to Rs 1,016 crore in the June 2021 quarter, on a dip in provisioning and a surge in other income. The bank had posted a net profit of Rs 510.39 crore in the corresponding quarter of the previous financial year.

Interest income was up at Rs 7,574.70 crore, against Rs 7,161.73 crore a year ago. Its gross non-performing assets ratio, increased to 2.88% per cent as of June 30, as against 2.53% a year ago. Net NPAs or bad loans, however, came down to 0.84% from 0.86% a year ago.

Income from retail banking rose nearly 22% to Rs 5,685.53 crore in the June 2021 quarter, from Rs 4,674.06 crore in the year-ago quarter.

The private sector lender is confident to maintain the 16-18% target on growth in the loan book.

Here is what brokerages are saying about IndusInd Bank post its Q1 results.

CLSA | Rating: Buy | Price target: Rs 1,350

The global brokerage firm has upgraded its price target for the bank to Rs 1,350 from Rs 1,325 earlier as the Q1 PPoP (Pre-provision operating profit) is in line with estimates, while slippage of Rs 2,700 crore was marginally higher than expectations.

The asset quality performance seemed manageable, while management intends to focus on growth as the second wave impact subsides.

Prabhudas Lilladher | Rating: Buy | Price target: Rs 1,280

With the prospects of recovery/upgrades remaining good, but should not see before the end of FY22 and slippages should be lower from H2FY22 onwards. Highlight since the lockdown has been a strong comeback on deposits led from retail taking CASA (Current account saving account deposits) to 42% from 40% and growing by average 20% which has helped on funding cost with further room ahead. Strong PCR of +70% and 100 basis points of COVID related provision cushions balance sheet impact and the bank has managed the pandemic quite well.

The brokerage house has revised its price target upwards to Rs 1,280 (from Rs 1,195) based on 1.7x Sep-23 ABV (average book value).

Motilal Oswal | Rating: Buy | Price target: Rs 1,200

NII (net interest income) growth stood muted ~8% YoY to Rs 3,560 crore (in line), affected by weak loan growth. NIM (net interest margin) declined by 7 basis points QoQ to 4.06% due to surplus liquidity available on the balance sheet. Healthy coverage and contingent provisioning buffer at 1% of loans provide comfort.

(Disclaimer: The recommendations in this story are by the respective research and brokerage firm. Money9 & its management do not bear any responsibility for their investment advice. Please consult your investment advisor before investing.)

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