Target: 800
CMP: ₹854.45
IndusInd Bank (IIB) has witnessed a steep decline in operating performance due to asset quality issues and accounting discrepancies. While the bank has recognised the due impact from these abnormalities, pressure on margins and elevated provisioning will continue to suppress near-term earnings.
The continued unwind and ongoing challenges in the MFI business are likely to keep business growth muted in the near term. We expect a gradual recovery from 2QFY26 onwards, with momentum strengthening further into FY27. We, thus, estimate loan and deposit growth to remain tepid at ~6.5-7 per cent y-o-y each for FY26E.
The bank reported a normalised margin of 3.47 per cent for Q4-FY25. We expect NIMs to contract further, reflecting the transmission of rate cuts and a continued decline in the mix of high-yielding assets. However, NIMs are likely to stabilize from Q2-FY26 onwards, as the SA rate cut takes full effect and the benefits of deposit repricing materialise amid a sharp decline in bulk deposit costs.
Given the ongoing uncertainties and continued softness in operating performance, we reiterate our Neutral rating. However, we take off the bear case multiples previously attributed to the stock due to heightened irregularities and lack of confidence in the reported numbers, even as our earnings estimates remain broadly unchanged.
We revise our TP to ₹800 (vs ₹650 earlier) based on 0.9x FY27E ABV. earlier).
Published on July 7, 2025
