Macquarie has maintained an ‘Underperform’ rating on IndusInd Bank, slashing its target price to ₹650, citing continued stress in asset quality and limited near-term return visibility.
While the bank’s Q1FY26 PAT was in line, a deeper dive shows that higher NIMs and treasury gains were countered by a significant drop in fee income. NII fell ~14% YoY to ₹4,640 crore, while NIMs rose to 3.46% (up 121 bps QoQ) due to one-off recoveries.
Slippages, though down ~290bps QoQ, remained elevated — leading to credit costs staying high. Macquarie noted that retail stress, especially in the vehicle finance segment, remains a concern. Return on Assets (RoA) is expected to stay below 1% in the near term, which is likely to weigh on valuation.
“Without consistent improvement in core earnings and slippages, a sustainable re-rating looks difficult,” Macquarie stated.
