Shares of IndusInd Bank fell more than 3% in early trade on October 20, a day after the bank announced second-quarter earnings.

IndusInd Bank reported a 57% year-on-year increase in net profit for the quarter. Its net profit in Q2FY23 was Rs 1,805.3 crore compared to Rs 1,146.7 crore in Q2FY22. The private lender’s net profit rose 10.6% quarter-on-quarter from Rs 1,631 crore in Q1FY23. Operating profit rose 10% YoY and 3% QoQ to Rs 3,554 crore.

Provisions fell 33% year-on-year to Rs 1,141 crore from Rs 1,706.9 crore in Q2FY22 and Rs 1,250.9 crore in Q1FY23.
Its total NPA as a percentage of total loan book decreased to 2.11% in Q2FY23 from 2.77% in Q2FY22 and 2.35% in Q1FY23. The gross NPA value for Q2FY23 was Rs 5,567 crore, down 10.8% year-on-year from Rs 6,245 crore in Q2FY22 and down 6.1% from Rs 5,932.9 crore in the previous quarter.

Lenders’ loans rose 18% YoY and 5% QoQ to Rs 260,129 crore in Q2FY23. Deposits in Q2FY23 rose 15% YoY and 4% QoQ to Rs 315,532 crore.

The bank’s CASA rose 15% year-on-year and 2% quarter-on-quarter to Rs 133,525 crore, while term deposits rose 14% year-on-year and 6% quarter-on-quarter to Rs 182,007 crore.

At 9:22 am, the IndusInd Bank was quoted at Rs 1,174.30, down Rs 44.05, or 3.62% lower on the BSE. It has touched an intraday high of Rs 1,217 and an intraday low of Rs 1,150.45.

CLSA has downgraded the stock to outperform, with a target of Rs 1,400 per share. It believes a near-fair multiple and debt improvement will be key. The net interest margin is stable, and the asset quality will continue to improve while there is a greater improvement. The brokerage said credit costs would not be an issue for the next 12-18 months.

IndusInd Bank reported a PAT of Rs 18.1 billion (up 57% YoY, in line with operating performance across all key metrics for the quarter). Year-on-year loan growth was steady at 18%, with corporate and consumer finance books in focus. Working capital loans drove corporate growth of 6.4% sequentially. Among consumers, growth has been broad-based, except for microfinance (MFI). However, as the disruptions caused by the regulatory changes have been adequately addressed, the book growth of MFIs should also pick up.

New slippage moderated significantly to Rs 15.7 billion (2.6% annualised), led by the corporate and consumer sectors. The GNPA/NNPA ratio increased by 24bps/6bps, respectively, 2.11%/0.61%. The restructured book fell to 1.5% in Q2FY23, compared to 2.1% in Q1FY23. Motilal Oswal estimates that PAT will report a 40% CAGR in FY22-24, resulting in a 16% ROE in FY24. We maintain Buy with a target of Rs 1,450 (based on 1.8x FY24E ABV).