IndusInd Bank profit beats estimates as asset-quality repair gathers pace

What happened

IndusInd Bank reported profit after tax of Rs 12.4 billion, 32% above Nomura's estimate, helped by lower credit costs and higher treasury income. Nomura raised its FY27 and FY28 earnings-per-share estimates by 16% and 7% and kept a Buy rating, though it cut its target price to Rs 1,060 from Rs 1,145.

Confirmed

Global impact / market context

A profit beat driven by lower credit costs suggests fewer loans are turning bad, which reduces losses the bank must absorb and supports future profit. Higher earnings estimates mean Nomura expects more profit per share, a key measure of value for each ownership unit, which can support the stock.

Analyst inference

Loan growth of 11% quarter-on-quarter was partly inflated by loans linked to FCNR(B) deposits, which are foreign currency deposits, and growth was 6% excluding Rs 166 billion of such advances. The micro-loan book grew 8% after nearly eight quarters of decline, while personal loans and credit cards kept shrinking.

Analyst inference

What to watch

1. The bank mobilised Rs 336 billion in FCNR(B) deposits, equal to 8% of total deposits, but CASA balances fell 2% quarter-on-quarter. CASA is low-cost current and savings account money, so a fall can raise funding costs. Confirmed
2. Watch whether Nomura's raised FY27 earnings-per-share estimate of 16% and FY28 estimate of 7% are met, and whether the lower Rs 1,060 target price still leaves room for the Buy rating to hold. Proposed
3. Watch whether micro-loan growth continues and personal loans and credit cards stop shrinking, because broader loan growth supports interest income, while vehicle finance growing only 1% sequentially may limit overall expansion. Analyst inference

Evidence

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