The bank’s loan growth moderated to 20 per cent YoY, led by slowdown in the commercial vehicles (CV) and corporate portfolios. Fresh slippages were up to Rs 1,950 crore, resulting in a 4.8 per cent QoQ increase in gross NPA. Net NPA as on Q3FY20 stood at 1.05 per cent as against 0.59 per cent in Q3FY19.
While the operating performance was healthy (net interest income (NII), margins, business growth, particularly deposits/PPoP), higher slippages remain a drag and also a reason for investor caution in a period of management transition.
Analysts at Motilal Oswal Securities expect IndusInd Bank’s loan growth to remain modest due to ongoing slowdown in the CV business and sluggish trends in the corporate portfolio. The bank should continue exhibiting a positive bias on margins due to a higher proportion of the fixed-rate loan book and a moderation in funding costs led by a decline in bulk deposit rates.
The brokerage firm cut its EPS estimates on the stock by 6 per cent/3 per cent for FY20/21 as it slightly raised credit cost estimate to reflect provisioning toward a fraud account and a further improvement in the coverage ratio.
“Despite strong return ratios, IndusInd Bank
now trades10 per cent lower than its last 10 year average multiple. This, in our view, is driven by lower comfort over earnings profile. Risk to corporate asset quality and high corporate fee income remains a key challenge to be addressed before multiple re-rates,” analysts at Antique Stock Broking in result review.