Macquarie on IndusInd Bank
Outperform, TP Rs1210
Another significant negative development
Current issue raises questions on internal processes
Create questions on the robustness of banks internal process and compliance
Believe this could be one of the reasons of a sub-optimal CEO tenor extension
Channel checks seem to suggest that such kind of losses are possible when the book is not fully covered and as per some treasury heads of banks, the new RBI accounting rules cannot solely explain the discrepancy
Has a large market share in NRI deposits and has been offering higher rates to customers
NRI segment deposits at Rs 58600 cr rose 39% YoY for Q3FY25 vs overall deposit growth of 11% YoY
MS on IndusInd Bank
Equal Weight Call, Target Price Rs900/Sh
Visibility on IndusInd stock continues to reduce
Over the past three months, the CFO has resigned, the CEO has been given a shorter-than-expected tenure extension, and now we are made aware of a big loss in the derivatives portfolio
See downside risk to numbers post the company’s disclosure
Await further clarity on the discrepancy
Citi on IndusInd Bank
Maintain Buy; Cut TP to Rs 1160 from Rs 1378
Derivative Position Discrepancy to Knock Earnings/Networth
Disclosure Coincides with CEO Extension Update
Cut earnings estimate by 25%
Recent developments have raised the risk perception and impacts disclosed borrowings cost too
Bank trades below FY26E book given near-term concerns/uncertainty
Nuvama on IndusInd Bank
Downgrade rating to Reduce from Hold; Cut TP to 750
Bank disclosed a negative post-tax impact of 2.35% of net worth arising from a markdown on internal derivative trades
These internal trades pertain to 5–7 years up to 31 March 2024 (stopped thereafter).
These were internal FX derivatives on the bank’s FX borrowings (mainly multilateral) and deposits.
The time line is discomforting—the CFO resigned just before the Q3 earnings, the CEO recently got a one-year extension instead of 3
Believe IIB’s credibility and earnings shall be impacted
IIFL on Indusind Bank
Discrepancies in derivatives accounting to hit networth by 2.35%
Resultant impact will most likely be routed through the P&L.
In such an event, it is likely that IIB may report a loss in 4QFY25
Given that MFI slippages are likely to further rise qoq and NIMs are likely to contract further in 4Q.
Estimate ~35bps of CET1 hit, but with the proforma CET1 ratio of 14.8%, it should not necessitate a capital raise.
Emkay on IndusInd Bank
Downgrade to ADD from BUY
Cut tp by ~22% to Rs875 from Rs1125
Huge accounting discrepancies observed in its forex derivatives portfolio which is expected to have an adverse impact of 2.35% on its net worth as of Dec-24 (post tax: ~Rs15.8bn).
This is based on preliminary findings, and the final impact may vary following completion of the external audit in Q4FY25.
Past accounting discrepancies in forex derivatives to hit FY25 RoA and NW
Current MD assures to stay for one year; expect MFI stress to peak in Q4FY25
Jefferies on IndusInd Bank
BUY, TP Rs1040 from Rs1080
Surprise Accounting Adj. Leads to Profit Hit; Reflects Weak Internal Controls
While this is specific to certain types of transactions & relates to past years, it clearly reflects weak internal controls.
This along with shorter CEO term extension & challenges in MFI will limit rerating.
We lower FY25e earnings by 25%
Mgt clarified that it had informed RBI earlier, but to us this comes as a negative surprise reflecting lack of internal controls.
One-time earnings impact, but can lead to short-term derating
MOSL downgrades IndusInd Bank
Rating to Neutral from BUY
TP at Rs925 vs Rs1100
Accounting discrepancy inflicts 2.35% damage on net worth
Near-term uncertainties prevail
These discrepancies arose from internal trades with low liquidity (3/5-year yen, 8/10-year dollar borrowings) that were on swap contracts and not MTM.
Financial hit will be absorbed in Q4FY25
DAM Capital on IndusInd Bank
Downgrade to Neutral from BUY
TP cut to Rs920 from Rs1200
Indusind Bank today disclosed to exchanges that during its internal review processes relating to other assets & liabilities part of the balance sheet
They noted discrepancies in account balances.
Hence, as per assessment there could be an impact of 2.35% on bank’s Dec-24 net-worth i.e Rs16.0bn (post tax).
There are more questions than answers, but we try to decode the same as management has appointed an external agency to independently review and validate internal findings.
Assuming the bank will account for the impact as exceptional items, we adjust Q4FY25 profitability with losses and cut FY25E EPS by 25%.
Though valuations appear cheap at 1.0x FY26 ABV post cut of 3% BV, they don’t make a compelling case given the ongoing issues.
The uncertainty surrounding management continuity, asset quality and the bank’s business model, combined with the unclear outlook for FY26 ROAs, leaving the stock vulnerable to de-rating.
