The share price of IndusInd Bank surged over 8 percent in intra-day deals on Monday as most brokerages remained bullish and management gave a positive commentary on the lender despite its poor performance in the September quarter.
The lender reported an over 53 percent decline in its standalone net profit at Rs 647.04 crore in the September quarter. The bank had posted a net profit of Rs 1,383.37 crore in the year-ago period. The earnings, however, beat analyst estimates.
The stock rose as much as 8.4 percent to the day's high of Rs 635 per share. However, on a YTD basis, the stock is the biggest loser on the Nifty Bank index, down 59 percent as compared to a 24 percent decline in Nifty Bank.
The stock ended 7.1 percent lower at Rs 627.15 per share as compared to a 0.36 percent (or 143 points) decline in BSE Sensex at 39,757.
The total income fell to Rs 8,731.05 crore on a standalone basis in Q2 versus Rs 8,877.02 crore in the year-ago quarter. The bank's gross Non-Performing Assets (NPAs) slightly rose to 2.21 percent of the gross advances as of September 30, 2020, from 2.19 percent in the year-ago period.
Provisions for bad loans and contingencies in the September quarter more than doubled to Rs 1,964.44 crore from Rs 737.71 crore in the year-ago period. On a consolidated basis, the lender's net profit dipped to Rs 663.08 crore in the latest September quarter from Rs 1,400.96 crore in the same period a year ago.
Managing director Sumant Kathpalia said the bank would continue to provide for risks in the coming quarters as well.
The management, however, was optimistic about loan growth. “There is a huge demand for tractor loans. Microfinance is a segment where growth is coming up," Kathpalia said after earnings announcements.
Despite the massive fall in Q2 profit, brokerage house Nomura maintained a 'buy' rating on the stock with a target at Rs 725 per share. It added that the lender is heading in the right direction and sees an RoE of 8 percent/12 percent for FY21/22. It also added that the current valuation is inexpensive.
Meanwhile, Motilal Oswal said, "The brokerage expects loan growth to remain muted over FY21, led by a weak environment and cautious approach by the management in building its book. Deposit traction remained strong while margins are likely to remain in a narrow range (a slight improvement from a reduction in the cost of funds and a decline in excess liquidity)."
First Published: IST