IndusInd Bank slips 5% in a weak market despite strong Q3 update

Shares of IndusInd Bank were up 3 per cent to Rs 1,273.20 in Wednesday’s intra-day trade, after the private lender posted 19 per cent year-on-year (YoY) increase in net advances at Rs 2.7 trillion by the end of December 31, 2022 (Q3FY23). Net deposits, too, grew 14 per cent YoY to Rs 3.25 trillion.

However, the stock fell 5 per cent to hit an intra-day low of Rs 1,206.25 per share. At 02:34 PM; it traded 1.5 per cent lower at Rs 1,222.50, as compared to 0.88 per cent decline in the S&P BSE Sensex. Earlier, IndusInd Bank hit a 52-week high of Rs 1,275.25 on September 20, 2022.

The bank’s loan growth continues to remain healthy as it grew 4.6 per cent QoQ (v/s up 4.9 per cent QoQ in Q2FY23). The CD ratio for the bank also improved further to 83.6 per cent (up 120bp QoQ).

While the deposit growth came in healthy at 3 per cent QoQ (up 14.3 per cent YoY to Rs 3.25 trillion), the CASA mix declined 40bp QoQ to 42 per cent.

That apart, the growth in retail/small business deposits remains robust as it grew 6.1 per cent QoQ to Rs 1.38 trillion. Analysts believe that the management is making consistent progress on shoring up retail deposit mix. Currently, the retail/small business deposits segment forms 42.4 per cent of the total deposits.

“IndusInd Bank continues to report a strong trend in loan growth; we expect these trends to remain healthy and support margins. Deposit franchise, too, is growing strongly, with sustained focus on ramping up retail deposits. Improvements in asset quality, particularly in the MFI/Restructuring book, and CV demand outlook are the key monitorables,” analysts at Motilal Oswal Financial Services said, maintaining a ‘buy’ rating on the stock with target price of Rs 1,241.

Meanwhile, analysts at ICICI Securities believe that the private sector lender is well placed to benefit from continued traction in credit demand from across segments – corporate as well as retail.

The entry in housing loans and focus on high yielding retail segment emphasise focus on maintaining yields, while driving business growth. The continued investment in physical and digital capabilities also would aid healthy business growth while gradual improvement in efficiency will aid return ratios, said analysts.

"The management expects credit cost at 1.2-1.5 per cent for FY23E. The increased focus on distribution capabilities and tech spends to keep opex elevated are key triggers for future price performance," the brokerage firm added, retaining 'buy' rating on the stock, with a target price of Rs 1,450 per share.