Stock market today: S&P 500 drops for fifth day as focus shifts to Powell’s speech
On Thursday, HSBC analysts downgraded Indusind Bank Ltd (IIB:IN) from ’Buy’ to ’Reduce’, adjusting the price target to ₹660 from the previous ₹770. The revision comes in the wake of reported accounting discrepancies totaling approximately ₹53 billion, which led to a quarter-over-quarter net worth erosion of 3%. Despite a Tier 1 capital ratio of 15.1% suggesting the bank is not at risk of insolvency, the discovery of these discrepancies has revealed Indusind Bank’s performance metrics, such as pre-provision operating profit (PPOP) return on assets (ROA) at 2.2% and a net ROA between 0.5-0.7%.
The bank’s financials, adjusted for the contingent provisions usage of around ₹13 billion, align it with mid-sized banks that struggle to maintain a cross-cycle ROA greater than 1%. The analysts pointed out concerns over the lack of clarity regarding new management, as several current management members are set to retire within the next six to nine months. This anticipated transition period is expected to necessitate a comprehensive rebuild of the bank’s operations.
HSBC’s stance reflects the uncertainty surrounding the bank’s future leadership and their ability to regain investor confidence, enhance profitability, and execute more effectively than their peers. With these considerations in mind, the downgrade to ’Reduce’ indicates a projected downside of approximately 14% from the previous target price.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.