Global brokerage CLSA has cut IndusInd Bank share price target to ₹900 from ₹1,300, citing the recent accounting discrepancy and uncertainty surrounding the private bank’s leadership. However, the global brokerage firm has maintained its ‘Outperform’ rating, drawing parallels to past market reactions seen in RBL Bank and Yes Bank.

The cut in IndusInd Bank share price target follows a turbulent week for the private lender, which first saw its MD and CEO receive only a one-year extension from the Reserve Bank of India (RBI) instead of the usual three years. Shortly after, the lender disclosed an accounting gap leading to a ₹1,500 crore hit to its net worth. These developments have fueled investor concerns over potential hidden risks.

Parallels with RBL Bank and Yes Bank

CLSA highlighted that the RBI’s decision to limit the tenure of IndusInd Bank’s top leadership is reminiscent of its move with RBL Bank in 2021. At the time, the regulator granted RBL Bank’s MD only a one-year extension before appointing a PSU banker, causing the stock to plummet by 60%. However, in the absence of any major negative surprises, RBL Bank share price eventually rebounded.

A similar short-lived reaction was seen with Yes Bank when the RBI abruptly replaced its CEO. Despite initial market fears, a later report indicated no significant divergence in gross non-performing loans (GNPLs). CLSA expects IndusInd Bank to follow a similar trajectory, where initial sentiment-driven volatility may give way to a more fundamental assessment over time.

Uncertainties and Potential Risks

In the short term, CLSA warns of heightened uncertainty over the bank’s stability and leadership continuity. If the RBI appoints a PSU banker, as was the case with RBL Bank, it could further dampen investor sentiment. Additionally, the potential invocation of the promoters’ pledged shares could add to the volatility.

However, the brokerage believes that if IndusInd Bank’s financial performance remains steady over the next four to six quarters, market concerns could ease.

Are There Any Silver Linings?

Despite the cut in IndusInd Bank share price target, CLSA sees a few bright spots for the lender. A recovery in the microfinance sector, better liquidity in the banking system, and potential interest rate cuts could provide some near-term relief. Moreover, if the bank’s promoters receive RBI approval to increase their stake following the acquisition of Reliance Capital, it could restore investor confidence, according to CLSA.

Cut in Estimates

CLSA cut its FY25 net profit estimates for IndusInd Bank by 25% due to the one-time extraordinary item (derivative portfolio hit). It also cut loan growth estimates by 2% each for the next two years as it believes the company’s focus will be on resolving current issues. CLSA marginally increased credit cost estimates for FY26 due to the microfinance collection issue in Karnataka.

“IndusInd Bank is a good cyclical play on the ongoing upcycle in auto loans in India. In addition, with a higher share of fixed rate loans, it is better placed than peers in a rate cut cycle. Given its smaller size, it should grow faster than private sector peers,” CLSA said.

On Thursday, IndusInd Bank shares ended 1.84% lower at ₹672.10 apiece on the BSE.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.