IndusInd Bank shares slip 4.5% on asset quality concerns in Q3 results

Updated : January 15, 2020 11:13 AM IST

Shares of IndusInd Bank limited shares declined as much as nearly 4.5 percent in early trade on Wednesday.

Almost 34 lakh shares exchanged hands on NSE with at least three large block deals of up to Rs 9.04 crore reported on NSE in trade so far today.

The 10-year return on IndusInd Bank is a massive over 905 percent, while in the last one year its stock has corrected by 5 percent.

Shares of IndusInd Bank limited declined as much as 4.5 percent in early trade on Wednesday on asset quality concerns, a day after the private sector lender released its third quarter results.

At 9.46 am, IndusInd Bank quoted at Rs 1,424.95 per share, down 3.83 percent on the National Stock Exchange. The scrip opened at the day's high of Rs 1,463.40, down over 2 percent from its Tuesday's close of Rs 1,481.65. The stock touched the day's low at Rs 1,416.

Almost 34 lakh shares exchanged hands on NSE with at least three large block deals of up to Rs 9.04 crore reported on NSE in trade so far today.

IndusInd Bank reports Q3FY20 results

Private sector lender IndusInd Bank reported 32 percent growth in a net profit in Q3FY20 at Rs 1,300.20 crore as against Rs 985.3 crore in the same period last year. Q3 net profit comes in slightly below CNBC-TV18 poll estimates of Rs 1,328.1 crore.

Net interest income (NII) during the quarter under review rose 34.3 percent YoY to Rs 3,074 crore as against CNBC-TV18 expectations of Rs 3,006.5 crore. Net Interest Margin (NIM) was up by 32 bps to 4.15 percent YoY.

Pre-provisions operating profit in Q3FY20 grew 29.69 percent to Rs 2,745.64 crore as against Rs 2,116.96 crore on year.

Provisions during the quarter came in at Rs 1,043.4 crore versus Rs 737.7 crore QoQ and versus Rs 606.7 crore YoY. Provision Coverage Ratio increased to 53 percent from 48 percent YoY.

Asset quality of the lender remained stable as Gross Non-performing assets (GNPA) in the third quarter of fiscal 2020 fell by 1 bps to 2.18 percent as compared to 2.19 percent in the previous quarter.

Net NPA fell by 7 bps to 1.05 percent as against 1.12 percent on quarter.

Gross NPA (as percentage of gross advances) rose 4.8 percent to Rs 4,578.43 crore versus Rs 4,370.2 crore on quarter while Net NPA fell 1.3 percent to Rs 2,173.29 crore versus Rs 2,202.57 crore QoQ.

Slippages in Q3FY20 increased significantly to Rs 1,945 crore as compared to Rs 1,102 crore QoQ.

Brokerages point to higher slippage in Q3 results

IndusInd Bank, Third quarter results, Brokerage calls

Here are the top brokerages calls on IndusInd Bank post its Q3FY20 results.

UBS Securities India retained 'sell' rating on IndusInd Bank with a price target of Rs 1,210 as the brokerage firm is of the view that the quality of earnings of IndusInd Bank deteriorated further in the quarter ended December because of higher-than-estimated slippages of Rs 1945 crore during the period.

The brokerage said pressure on the bank's asset quality showed up in the quarter. IndusInd Bank reportedly categorised its exposure to Dewan Housing Finance Corp, and Cox & Kings as 'fraud' during the quarter under review.

UBS Securities also termed the bank's net interest income growth and operating margin performance as below its estimate.

Among other brokerages, Morgan Stanley maintained 'overweight' at a target price of Rs 1,800 per share. The global brokerage sees strong returns from IndusInd Bank over one year given strong capital, PPoP and RoE. It noted that uncertain asset quality could keep the stock volatile in near term.

Nomura has kept 'buy' rating with a target price of Rs 1,750 saying that while PPoP Outlook is improving, the lender is not out of the woods on corporate credit.

Macquarie says higher slippages in corporate as well as retail were the sore point in IndusInd Bank's third quarter earnings. The silver lining, however, the brokerage says is that bank's exposure to the three stressed groups has declined further. Macquarie has maintained 'outperform' rating at a target price of Rs 1,850 per share.

Citi raised IndusInd Bank's price target to Rs 1,900, keeping 'buy' rating on the stock as core operating performance remains healthy which can support higher provisions.

IDFC Securities has downgraded IndusInd Bank to 'neutral' on higher corporate risks with a stock price target of Rs 1,380 per share.

Long-term trends in IndusInd Bank

The 10-year return on IndusInd Bank is a massive over 905 percent, while in the last one year its stock has corrected by 5 percent. In the last two days, the stock has fallen 7.6 percent.

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