IndusInd Bank Shares Sink to 52-Week Low Amid UBS Downgrade and RBI Concerns
IndusInd Bank shares experienced a significant decline on December 13, 2024, falling by 3.24% to reach a new 52-week low of ₹965.55 per share.
This downturn followed a revised target price of ₹1,150 per share issued by Zurich-based brokerage UBS, which maintained its ‘Neutral’ stance on the stock.
The private lender’s performance reflects growing concerns among investors about the banking sector’s regulatory and market environment.
Regulatory Challenges Weigh on Banking Sector
A report from Nomura, dated December 10, highlighted the increasing challenges faced by the Indian banking sector due to regulatory tightening by the Reserve Bank of India (RBI).
Many investors perceive the sector as less favorable for investment, apart from a few high-quality names. Nomura analysts noted that while potential relaxation in draft regulations could boost loan growth and profitability, the likelihood of such changes remains uncertain.
Additionally, Nomura’s analysis indicated that a 50-basis-point reduction in the repo rate could impact the return on assets (RoA) of large banks by approximately 5-10 basis points.
For mid-sized banks like IndusInd Bank, AU Small Finance Bank, and Bandhan Bank, the impact is expected to be less severe.
However, analysts emphasized that concerns about asset quality are more critical than implications for net interest margins (NIM).
Preferred Banking Stocks
Nomura expects stock price outperformance in the banking sector to remain concentrated among select players, with SBI, ICICI Bank, and Federal Bank being their top picks.
IndusInd Bank, rated ‘Neutral,’ faces ongoing challenges, including mixed financial performance for the second quarter of FY25.
Mixed Q2 FY25 Results
IndusInd Bank’s financial results for Q2 FY25 reflected both gains and setbacks:
Net Interest Income (NII): Increased by 5% year-on-year (YoY) to ₹5,347 crores.
Net Interest Margin (NIM): Declined to 4.08% from 4.29% YoY, partly due to a reduced share of microfinance loans in the overall portfolio.
Yield on Assets: Remained steady at 9.69% for the quarter ended September 30, 2024.
Cost of Funds: Rose to 5.61% from 5.40% in the corresponding quarter of the previous year.
Pre-Provision Operating Profit (PPOP): Fell to ₹3,600 crores from ₹3,909 crores YoY.
Net Profit: Dropped by 39% YoY to ₹1,331 crores, a significant decline from ₹2,202 crores in Q2 FY24.
Stable Asset Quality
Despite financial setbacks, IndusInd Bank’s asset quality remained stable. Gross non-performing assets (NPA) increased slightly to 2.11% of gross advances as of September 30, 2024, compared to 2.02% as of June 30, 2024.
Similarly, net NPA rose marginally to 0.64% from 0.60% over the same period. The stability in loan book quality offers some reassurance amid broader challenges.
Market Performance and Valuation
At 11:46 AM on December 13, IndusInd Bank’s shares were trading at ₹971.35, a 2.66% drop. By market close, the stock settled at ₹987.05, down 1.09% from the previous day’s close.
In contrast, the BSE Sensex fell 0.71%, while Bank Nifty gained 0.69%, demonstrating a mixed day for the banking sector.
Over the past three months, IndusInd Bank shares have declined by 32.58%, and over six months, they’ve fallen 34.50%. On a year-to-date (YTD) basis, the stock has corrected by 38.32%.
Its market capitalization now stands at ₹76,895.53 crores, trailing Union Bank of India, IDBI Bank, and Canara Bank in valuation.
IndusInd Bank’s Legacy and Global Reach
IndusInd Bank, with a legacy spanning 30 years, has established itself as a leader in providing innovative and progressive financial solutions.
Its services cater to a diverse clientele, including retail customers, public sector units (PSUs), government entities, and large corporations.
The bank’s offerings include microfinance, personal loans, SME loans, vehicle financing, credit and debit cards, affluent banking, and advanced digital banking facilities.
IndusInd Bank also focuses on environmental, social, and governance (ESG) initiatives, aligning its products with sustainable practices.
With representative offices in London, Dubai, and Abu Dhabi, the bank serves over 41 million customers through its 3,040 branches and 3,011 ATMs across India.
Commemorating 30 Years with India Post
On its 30th anniversary, IndusInd Bank announced a collaboration with India Post to release “Customized My Stamps.” These stamps are now available for public purchase on the India Post’s official portal.
This initiative underscores the bank’s commitment to fostering meaningful collaborations and celebrating its journey.
