Broker's call: IndusInd Bank (Buy)

| Updated on June 22, 2021

Emkay Global

IndusInd Bank (Buy)

Target: ₹1,375

CMP: ₹1,000.35

IndusInd Bank (IIB) has scripted a major turnaround 1.0 since 2009/10, but faltered lately with higher corporate NPAs/deposit scare. The bank has largely rectified its past mistakes, built prudent capital/provisioning buffers and is preparing to build sustainable and digitally agile retail bank, delivering yesteryear's superior RoA trajectory of 1.7-1.9 per cent over FY23/24.

Amid the ongoing pandemic, the bank intends to shore up contingent buffer (1 per cent of loans) including counter-cyclical buffers given cyclical retail book to bring stability to earnings in the long run. We believe that retailisation of assets (55 per cent vs 52 per cent) liabilities (50 per cent vs 37 per cent) should structurally improve NIMs/core-PPoP, while moderating LLP should drive-up RoAs.

IIB assured that risk/governance standards have been strengthened while promoter interference has been virtually NIL, and its recent capital subscription at a premium should provide investor comfort. IIB is waiting for holdco norms to enter into broking/AMC/non-life insurance business, and is open to strategic stake in fintech to strengthen digital offering.

We believe a resurgent IndusInd with higher retail orientation/risk guards in place should be deliver sustainably higher return ratios, providing a good turnaround story to play on.

Published on June 23, 2021

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