IndusInd Bank shares are under the spotlight after a muted Q3 performance, with mixed reactions from major brokerages. While CLSA and Bernstein have maintained an Outperform rating with a potential 31% upside, HSBC has taken a more cautious stance, cutting its target price while highlighting ongoing stress in the bank’s microfinance segment. The stock is currently trading at ₹995.20.
CLSA has reiterated its Outperform rating on IndusInd Bank, with a target price of ₹1,300, suggesting a potential 31% upside. The brokerage noted that it was a muted quarter due to continued stress in the microfinance (MFI) industry. While pre-provision operating profit (PPOP) was largely in line with expectations, credit costs were 20-25 basis points higher than anticipated. MFI slippages increased from ₹4 billion to ₹7 billion sequentially, though non-MFI retail slippages showed marginal improvement. A positive takeaway was that December saw better performance compared to October and November in terms of early delinquencies. Overall, loan growth was modest at 12% YoY, while net interest margins (NIM) contracted by 15 basis points quarter-on-quarter.
Bernstein also maintained its Outperform rating with a target price of ₹1,300, echoing CLSA’s optimism despite short-term challenges. The brokerage highlighted that return on assets (RoA) declined to 1%, down from 1.3% last quarter when adjusted for contingent provisions. The bank also recorded an EPS decline of 40% for the second consecutive quarter, reflecting ongoing earnings pressure. While asset quality trends remain weak, Bernstein suggested that the worst may be over for the MFI segment. At the current price-to-book (PB) ratio of 1.1x, any sign of bottoming out would be viewed positively by investors.
On the other hand, HSBC has taken a more cautious stance, maintaining a Buy rating but cutting the target price to ₹1,150, indicating a 15.5% upside from the current levels. The brokerage pointed out that most financial metrics remain under pressure, and more stress is likely to follow, particularly in the microfinance segment. HSBC has revised its FY26-27 EPS estimates down by 12-16%, citing expectations of lower loan growth and persistent pressure on key earnings metrics. Despite the near-term challenges, HSBC believes the risk-reward ratio is favorable at 1x FY26 estimated book value (BV), suggesting that value may only be realized in the medium to long term.
With varying views from brokerages, IndusInd Bank’s stock performance will largely hinge on how quickly it can stabilize asset quality in its microfinance segment and improve its earnings trajectory.
(Disclaimer: This article is for informational purposes only and does not constitute financial advice. Investors should consult their financial advisors before making any investment decisions.)
