LIVE UPDATES: Fed Chair Jerome Powell to deliver major speech at Jackson Hole
On Friday, CLSA downgraded Indusind Bank Ltd (IIB:IN) from ’Outperform’ to ’Hold’ and reduced the price target from INR900.00 to INR780.00. The downgrade follows the release of an internal audit report last week that revealed accounting discrepancies in the bank’s microfinance business.
The audit found that Indusind Bank incorrectly recorded INR6.74 billion as interest income in the first nine months of the fiscal year 2025, which will be reversed in the fourth quarter. Additionally, the bank’s balance sheet showed that ’other assets’ and ’other liabilities’ were inflated by INR6 billion. According to CLSA, these findings are not expected to impact the profit and loss statement.
The discovery led to a revision of the bank’s net interest margin (NIM), which, after adjusting for the INR6.74 billion additional interest income, was 17 basis points lower than reported. Consequently, CLSA has reduced its fiscal year 2025 profit after tax (PAT) estimate for Indusind Bank by 22% due to the reversal of the INR6.74 billion. The firm also cut its fiscal year 2026-2027 PAT estimates by 13%-17% owing to NIM compression and anticipated lower growth.
CLSA predicts that Indusind Bank will achieve a return on equity (ROE) of 9%-10% over the next two years. The revised price target of INR780 is based on 0.8 times the fiscal year 2027 projected book value (PB). The downgraded rating from ’Outperform’ to ’Hold’ reflects the firm’s revised expectations for the bank’s financial performance.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.