IndusInd Bank share price: What made IndusInd Bank shares jump 10% despite Q4 profit miss

NEW DELHI: Shares of IndusInd Bank surged 10 per per cent as soon as the scrip opened for trade on Tuesday. Deposits seems to have stabilised, response from customers on moratorium has been low and the management commentary was quite positive, said analysts.

Operationally, March was a strong quarter for IndusInd Bank, said CLSA which has a target of Rs 610 on the stock.

On Tuesday, the scrip jumped 10 per cent to Rs 454.45 on BSE.

“The stock has eroded its 2/3rd value in the last three months due to perceived risk in near-term earnings. Valuation at 0.8 times FY21 price to adjusted book value renders risk-reward favourable,” said ICICI Securities.

Morgan Stanley said the management guidance was positive and that it was higher provisions that triggered profit miss.

The private lender posted a 16.18 per cent year-on-year (YoY) fall in profit at Rs 301.84 crore for the quarter ended March 31. The net interest income (NII) increased 44.62 per cent on a yearly basis to Rs 3,211.19 crore.

In its conference call, the bank said it received 96 per cent of non-vehicle portfolio repayments and 95 per cent of repayments in vehicle portfolio in March. In the MFI portfolio, the lender received 99 per cent of repayments, IndusInd Bank said.

Among sectors, MSME book is stable so far, the bank said, adding that the bank’s deliquencies were considerably lower below market levels. Real estate, it said, has nil SMA2 or NPAs and no borrower approached for loan extension. Besides, the bank said all of its NBFC accounts are standard and that in telecom sector, the bank provided for Rs 75 crore of standard asset provision.

Percentage of gross non-performing assets (NPA) stood at 2.45 per cent in the March quarter against 2.18 per cent as of December 31, 2019. The figure stood at 2.10 per cent in the same period last year. IndusInd Bank said it recognised a few weak non-performing accounts in the Jan-March period. It made a floating provision of Rs 260 crore during the quarter, the lender said. Credit card GNPA is seen at 1.97 per cent.

“Profitability was impacted due to higher provisions. GNPA ratio increased sequentially but deposits seem to have stabilised.Response from customers for moratorium has been low and that retail likely to see higher growth NII/PPOP were above our estimates but PAT was 62 per cent below estimate,” said Nirmal Bang Institutional Equities.

This brokerage has revised estimates for FY21/FY22 but has retained Buy rating on the bank with a new target ofRs595 from Rs 623 earlier.

The bank said deposits grew 4 per cent overall, despite some large government deposit withdrawals during the quarter, especially after YES Bank collapsed.

The bank has made higher provisions to protect the book against Covid-19’s impact. Provisions and contingencies increased 56.36 per cent YoY and 134 per cent QoQ to Rs 2,440.32 crore. It has now fully provided against IL&FS account.