Promoted by Hinduja Group, IndusInd Bank is a private-sector bank. It is the fifth-largest private bank in India. The lender has a strong pan-India presence with nearly 2,400 branches as of December 2022. The bank is a major financier of vehicle purchases with 26% of all its loans being vehicle loans. The Induslnd Bank share price has delivered 25% in the last year.
Analysts maintain their bullish view of the stock as they believe the bank is delivering on the guided path. Those at ICICIdirect have a BUY rating on the Induslnd Bank share price with a target price of Rs. 1,420.They cite the following reasons for their conviction:
Table of Contents
Loan growth
The bank said its loan growth was supported by vehicle financing, corporate lending, credit card, business loan, personal loan, and affordable housing loans. Year on year, the loan growth during the quarter that ended December 2022 stood at 19% against the 17.8% YoY growth reported in the previous quarter. IndusInd Bank had charted a two-year loan growth target of 15-18% from FY21 to FY23.
The growth was higher than the industry average and close to reported by leading banks. Encouragingly, growth was broad-based across retail as well as corporate segments, said analysts, which bodes well for the bank.
Slippages hit a low
Slippages – the instance when a loan turns into a bad loan – were at nine quarter low, the bank said, reflecting the health of its loan book. Of the slippages, 92% were from the consumer financing segment and the remaining 8% were from the corporate book. Slippages were also partially offset by upgrades, recoveries and write-offs.
The NPA crisis that happened in the last decade was largely due to high slippages in the corporate book. Now, the low level of slippages from there is a good sign.
MFI lending slows
Microfinancing activities showed flat quarter-on-quarter growth despite a low base, which is a cause of concern for the bank. The bank needs to work on this front, said analysts.
Analysts take
Analysts noted that the bank has reported a 1.87% return on assets and more than 15% return on equity during Q3FY23. It has, thereby, improvingthe visibility of the lender being able to deliver 1.9% RoA and 16% RoE by FY24.They added that a revival in microfinancing and some vehicle financing products, and encouraging growth in corporate lending will drive loan growth towards the two-year target of 15-18%. This, if achieved, will give a fillip to the stock price.
However, analysts cite key risks to their assessment including higher operational expenditure towards franchise investment, and credit costs not normalising soon.