Morgan Stanley Cuts IndusInd Bank's Target Price on Weaker Earnings Outlook

1 min read     Updated on 08 Apr 2025, 08:47 AM
scanxBy ScanX News Team
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Overview

Morgan Stanley has reduced IndusInd Bank's target price from Rs 1,105.00 to Rs 755.00, a 32% cut, due to weaker projected earnings. The bank's Q4 FY25 update showed slowed loan and deposit growth, with a 6% quarter-on-quarter decline in CASA deposits. Earnings per share estimates for FY25, FY26, and FY27 have been revised downward by 27%, 17%, and 17% respectively. The firm also cited uncertainties in leadership and strategy, leading to increased cost of equity assumptions.

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*this image is generated using AI for illustrative purposes only.

Morgan Stanley has significantly reduced its target price for IndusInd Bank , citing concerns over the bank's projected earnings and recent performance. The global financial services firm has adjusted its outlook for the Indian private sector lender, reflecting a cautious stance on the bank's near-term prospects.

Target Price Reduction

Morgan Stanley has slashed IndusInd Bank's target price by nearly 32%, from Rs 1,105.00 to Rs 755.00. This substantial reduction is primarily attributed to weaker projected earnings for the bank in the coming years.

Q4 FY25 Performance Update

The bank's fourth-quarter update for the fiscal year 2025 revealed several key points of concern:

  • Slowed loan growth
  • Decelerated deposit growth
  • A notable 6% quarter-on-quarter decline in CASA (Current Account Savings Account) deposits

These factors have contributed to a less optimistic outlook for the bank's financial performance.

Earnings Estimates Revised

In light of these developments, Morgan Stanley has significantly revised its earnings per share (EPS) estimates for IndusInd Bank:

Fiscal Year EPS Estimate Reduction
FY25 27%
FY26 17%
FY27 17%

Strategic Uncertainties

Adding to the financial concerns, Morgan Stanley highlighted uncertainties surrounding IndusInd Bank's leadership and strategy. These factors have led the firm to increase its cost of equity assumptions for the bank, further impacting the valuation.

Market Implications

The downward revision in target price and earnings estimates by a major financial institution like Morgan Stanley could potentially influence investor sentiment towards IndusInd Bank. However, it's important to note that this represents one firm's analysis, and investors should consider multiple sources and conduct their own research when making investment decisions.

As the banking sector navigates through challenging times, IndusInd Bank's ability to address these concerns and improve its financial metrics will be crucial in regaining investor confidence and potentially revising future outlooks.

Historical Stock Returns for Indusind Bank

1 Day5 Days1 Month6 Months1 Year5 Years
-1.89%+4.57%-3.06%-18.97%-44.83%+108.13%
Indusind Bank
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IndusInd Bank Q4 Update: Mixed Performance and UBS Price Target Cut

1 min read     Updated on 07 Apr 2025, 05:48 AM
scanxBy ScanX News Team
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Overview

IndusInd Bank's Q4 FY25 update shows 1.40% YoY growth in net advances to ₹3.47 lakh crore, but a 5.20% QoQ decrease. Total deposits grew 6.80% YoY to ₹4.11 lakh crore. CASA ratio declined to 32.80%. UBS maintained a 'Sell' rating, cutting the price target by 22% to ₹600, citing concerns over deposit flows, CEO appointment, and pending auditor report. UBS also lowered loan growth estimates to 10% and reduced NIM estimates for FY26 and FY27.

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*this image is generated using AI for illustrative purposes only.

IndusInd Bank , one of India's leading private sector banks, has released its Q4 FY25 business update, revealing a mixed performance in advances and deposits. The bank's financial metrics show resilience in some areas while facing challenges in others, reflecting the current market dynamics.

Advances and Deposits

Net Advances

  • Year-over-Year (YoY): Increased by 1.40% to ₹3.47 lakh crore
  • Quarter-over-Quarter (QoQ): Decreased by 5.20%

Total Deposits

  • YoY: Grew by 6.80% to ₹4.11 lakh crore

While net advances showed modest YoY growth, the QoQ decline might be attributed to the challenging economic environment and cautious lending practices. The growth in deposits indicates continued customer trust and the bank's ability to attract funds despite market volatility.

CASA Ratio Decline

The Current Account Savings Account (CASA) ratio decreased to 32.80%, down from previous levels. This reduction suggests a shift in the composition of deposits, potentially impacting the bank's cost of funds.

UBS Analysis and Price Target Cut

UBS, a global financial services firm, has maintained a 'Sell' rating on IndusInd Bank and significantly reduced its price target:

  • New price target: ₹600.00
  • Reduction: 22.00% from the previous target

Concerns Cited by UBS

  1. Deposit flows
  2. CEO appointment
  3. Pending auditor report

Adjusted Estimates

  • Loan growth estimate lowered to 10.00%
  • Reduced Net Interest Margin (NIM) estimates for FY26 and FY27

Outlook

While IndusInd Bank faces challenges in terms of QoQ advance growth and CASA ratio decline, its ability to grow deposits year-over-year demonstrates some resilience. However, the UBS analysis highlights significant concerns about the bank's near-term prospects.

The coming quarters will be crucial for IndusInd Bank as it navigates through the evolving economic landscape, addresses the concerns raised by analysts, and works towards strengthening its market position. Investors and stakeholders will be closely watching for developments regarding the CEO appointment, the outcome of the pending auditor report, and the bank's strategies to improve deposit flows and maintain profitability.

Historical Stock Returns for Indusind Bank

1 Day5 Days1 Month6 Months1 Year5 Years
-1.89%+4.57%-3.06%-18.97%-44.83%+108.13%
Indusind Bank
View in Depthredirect
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