IndusInd Bank Q3 results preview: Weak NII, higher provisions could drag PAT down by 40% YoY

Slower loan growth, coupled with elevated slippages, could keep third quarter earnings in check for IndusInd Bank. Analysts point to a disappointing show on almost all the metrics.

The net interest income (NII) during the third quarter is likely to rise by a marginal 1% year-on-year (YoY), according to an average estimate of six brokerages. This along with higher provisions could drag the PAT down significantly by 40% YoY.

The microfinance portfolio of IndusInd Bank has been under pressure with rising slippages, leading to a likely sharp uptick in the provisions during the December quarter.


Analysts say the business growth of loans and deposits will also remain moderate in the reporting period.

Citi

In the MFI segment, continuous forward flow from 30+ dpd will lead to higher slippages in 3Q as well. Any incremental slippage from vehicle finance and corporate portfolio will further accentuate the slippages.

We estimate slippage at 2.9-3% and credit cost of almost 200bps, defying the seasonal trend of improvement in slippages/credit cost are in 2H. Upward repricing of deposit cost, growth being led by relatively low yielding segments, and elevated slippages leading to interest reversal could drag reported NIMs below 4%. We expect reported NIMs to settle at 3.95%.

Further moderation is anticipated in the MFI portfolio in 3Q. Vehicle disbursement is expected to see some revival and the mid-corporate and corporate segment could see some momentum. It will continue to scale-up home loans, merchant lending and MSME loans.

Overall we build-in loan growth of 11% YoY/2% QoQ and deposits growth of 14% YoY/2% QoQ. C/I is expected to increase given the expected sequential drop in NII and flat other income. Expect ROA to drop below 1%.

Nomura

Credit cost to stay more elevated versus peers led by higher delinquencies in MFI and credit cards. Lower growth in higher yielding segments to result in sharper NIM moderation versus peers.

Kotak Equities

Operating profit slowed down, led by weak loan growth (12% YoY, 3% QoQ) and pressure on revenue growth (NIM and fee income).

NIM (reported) likely to decline 15 bps QoQ at 3.85%. Deposit growth was weak at 11% YoY. We see RoE at ~5% in 3QFY25 led by higher credit costs.

We expect provisions to increase sharply due to higher slippages from the MFI portfolio but trends appear to be less worrisome as compared to other players. We are building slippages of 3.5% (Rs 3100 crore). The key focus area would be the cost of funds, trends on operating expenses growth and situation on the ground pertaining to the MFI portfolio.

Nuvama

NII is likely to decline 2% QoQ / 1% YoY. Margins could decline by 8bp QoQ. Lower NII and higher provisions could lead to decline in PAT by 10% QoQ. Loan and deposit growth is likely to grow at 1.6% and 2% respectively.

Motilal Oswal

Expect business growth to remain moderate. Expect asset quality to witness a slight deterioration. Expect margins to decline further. Credit costs likely to be elevated

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