IndusInd Bank shares crashed on Friday, 25th October 2024, following the bank’s result for Q2 FY25 as it fell short of expectations. The share price had skidded 19.6% intraday to an all-time low of ₹1,027.8 on BSE, the lowest level since May 2023. Such a sharp fall had worried investors and market analysts.
Poor financial performance leads to panic selling.
Several reasons highlighted by IndusInd Bank’s Q2 earnings report contributed to its stock dropping sharply. Analysts stated that NIM is too weak and that the deterioration in asset quality coupled with high credit costs was responsible for such a dismal financial performance. Provisions are said to have surged through the roof as the earnings missed on an overall level while being reported as the weakest growth to have been experienced in the banking sector in the quarter.
On the same day of declaration, the benchmark BSE Sensex index declined by 627 points or 0.78%, and the value stood at about 79,438 points at approximately 11:40 a.m. This downfall of the bigger market added further negativity around IndusInd Bank’s performance.
Analysts Reduce Targets
Several analysts have trimmed price targets on IndusInd Bank shares after the bank posted an underwhelming quarter. “The bank has reported a disappointing quarter on most fronts led by higher credit costs, NIM compression, and slower fee momentum,” said JM Financial. The brokerage has pared its target price to ₹1,380 per share from ₹1,900, valuing the stock at 1.4 times price-book value on FY26 earnings estimates.
Institutional Equities at Nuvama had similar thoughts. The firm trimmed FY25 and FY26 earnings-per-share (EPS) estimates by 20% and 15% respectively. It downgraded the stock from ‘buy’ to ‘hold and lowered the target price from Rs1,690 to Rs1,290, a more cautionary outlook about the bank’s future performance.
Key Numbers
Key financials by IndusInd Bank Q2 FY25 paint a tough picture :
- Net profit: The bank’s net profit came down 39.2% year-on-year (Y-o-Y) at ₹1,325.45 crore.
- Net Interest Income (NII): NII rose only 5% Y-o-Y though dipped 1.1% Q-o-Q at ₹5,347 crore.
- NIM: NIM contracted to 4.08% as against 4.29% a year ago and 4.25% Q-o-Q.
- Loan growth: Net advances grew just 2.7% Q-o-Q and 13.2% Y-o-Y, led only by a 0.2% Q-o-Q growth in the retail segment.
Asset Quality Concerns
IndusInd Bank again faces the issue of asset quality. The bank experienced a rise of 17% Q-o-Q in its slippages at Rs 1,800 crore. Gross non-performing assets (GNPA) increased to 2.11% from 1.59%, and net non-performing assets (NNPA) rose to 0.64%. Stress seems to have crept into the loan book of the bank, especially in the microfinance space. This would be similar in the quarters ahead.
Conclusion: What’s In Store for IndusInd Bank’s Share Price?
The downward trend of the share price of IndusInd Bank highlights investor anxiety related to the bank’s financial situation and prospects. The current downbeat trend does not seem to finish with analysts as they scale back their estimates and point out matters like low earnings, high credit costs, and issues with asset quality, among others, and several other money health issues.
Investors should track IndusInd Bank’s performance in the coming quarters to see if credit risks can be managed and net interest margins improve. The next few weeks are going to determine whether the bank can stabilize and regain investor confidence before this slide in the share price turns worse.
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