Brokerages have issued mixed views on a major private sector bank following the conclusion of an external review on its derivative portfolio discrepancies. While Macquarie and Citi see the findings as incrementally positive, Morgan Stanley remains cautious, preferring to wait for further clarity from the upcoming earnings and a comprehensive audit.
The bank in focus is IndusInd Bank, which recently received an external agency report confirming that the adverse post-tax impact of the derivative portfolio issue stands at ₹19.79 billion, or 2.27% of its net worth as of June 2024. This is marginally lower than the 2.35% impact previously estimated by the bank’s internal review.
Macquarie: Outperform | TP ₹1,210
Macquarie believes the outcome of the external review is incrementally positive, as the impact is slightly lower than internal projections. It expects the final financial hit to be contained within earlier estimates, removing a key overhang for investors. The brokerage continues to see upside and has maintained an ‘Outperform’ rating.
Citi: Buy | TP ₹890
Citi echoed similar sentiments, stating that the discrepancy impact was largely within the expected range. The brokerage added that modest earnings may persist due to ongoing MFI-related stress and provisioning, but flagged management transition—particularly around the MD & CEO role—as a key monitorable in the near term.
Morgan Stanley: Equal-weight | TP ₹755
In contrast, Morgan Stanley has opted for a more neutral stance, maintaining its ‘Equal-weight’ rating. While acknowledging that the external report has confirmed the derivative discrepancy loss aligns with internal estimates, it prefers to wait for the comprehensive audit findings. MS also wants to assess the Q4FY25 results before making a more definitive call, with a focus on margin outlook, asset quality trends, and overall growth trajectory.
At last close, IndusInd Bank shares were trading at ₹735.50, closely aligned with MS’s revised target. The next few weeks—featuring the Q4 earnings and possible management updates—could play a pivotal role in shaping investor sentiment.
Disclaimer: The above views are of the brokerages and not the author or the publication. Please make any and every investment decision after consulting your financial advisor.
