IndusInd Bank Share Plummet 20% After Q2 Profit Decline and Asset Quality Concerns

IndusInd Bank Share All Latest Updates

IndusInd Bank Ltd., a prominent player in the private banking sector, faced a tumultuous day in the stock market on October 25, as its shares plummeted by 20%. This dramatic fall came on the heels of the bank’s disappointing quarterly results, which were released after market hours the previous day.

IndusInd Bank Share: Details

The second quarter of FY25 proved to be challenging for IndusInd Bank, with the consolidated net profit dropping by a staggering 39.5% year-on-year, amounting to ₹1,331 crore. This marks a sharp decline from ₹2,181 crore in the same quarter last year. Despite a modest growth in net interest income (NII), which increased by 5% to ₹5,347 crore compared to ₹5,077 crore a year earlier, the overall financial performance fell short of market expectations.

The bank’s net interest margin (NIM), another crucial metric for assessing profitability, slipped to 4.08%, down from 4.29% in the previous year’s quarter. This decline in NIM suggests mounting pressure on the bank’s profitability, raising concerns among investors.

Asset Quality Deterioration

One of the most alarming aspects of IndusInd Bank’s latest results is the deterioration in asset quality. The gross non-performing assets (NPA) increased to 2.11%, up from 2.02% in the previous quarter. The net NPA also saw a rise, standing at 0.64% compared to 0.6% in June. In absolute numbers, gross NPA climbed to ₹7,638.5 crore from ₹7,126.8 crore, while net NPA rose to ₹2,282 crore from ₹2,095 crore.

To counter the worsening asset quality, provisions surged by 87% year-on-year and increased by 73% from the June quarter, totaling ₹1,820.1 crore. Furthermore, operating profit experienced a decline of 7.2% compared to last year, dropping nearly 9% sequentially to ₹3,599 crore.

Growth Amidst Challenges

Despite the alarming drop in profit and the challenges associated with asset quality, IndusInd Bank reported a 13% year-on-year growth in loans, bringing the total to ₹3.57 lakh crore. Similarly, deposits witnessed robust growth, rising by 15% to ₹4.12 lakh crore. These positive indicators suggest that, despite the current hurdles, the bank is managing to attract new business and depositors.

Analysts’ Perspectives

Following the release of the quarterly results, analysts provided mixed reviews regarding IndusInd Bank’s future outlook. Nomura maintained a “neutral” stance on the stock, slashing its price target from ₹1,580 to ₹1,220. The brokerage described the latest quarter as weak and characterized the outlook as “challenging.” They have also adjusted their Return on Equity (RoE) expectations from 14% to a range of 11-13% for FY25 to FY27, although they noted that the absolute downside for the stock remains limited due to its benign valuations.

Macquarie, on the other hand, retained its “outperform” rating with a more optimistic price target of ₹1,690. However, they cautioned about worsening asset quality issues within the microfinance institution (MFI) sector, presenting a downside risk to their Return on Assets (RoA) estimate of 1.8% for FY25.

Citi also upheld its “buy” rating but lowered its price target significantly from ₹2,010 to ₹1,630. This revision reflects expectations of lower loan growth and modest fee income, prompting an earnings estimate reduction of 18% to 22% for FY25 to FY27.

Out of the 50 analysts covering IndusInd Bank, a notable 41 continue to advocate for a “buy” rating, while eight suggest holding the stock and one recommends selling.

Current Trading Status

As of now, shares of IndusInd Bank are trading at ₹1,028.75, reflecting a steep 20% decline. This marks the largest single-day drop for the stock since March 2020, signaling a significant moment of uncertainty for investors and stakeholders alike.

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