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On Thursday, UBS analysts maintained a Sell rating on IndusInd Bank (NSE:INBK) Ltd (IIB:IN) with a steady price target of INR600.00. The bank reported a substantial loss of Rs23.3 billion in the fourth quarter of the fiscal year 2025, which was a significant deviation from UBS and consensus estimates. This loss included a negative impact on profit before tax (PBT) due to several one-time items identified in internal and external audits. According to UBS’s assessment, these one-offs amounted to approximately 7% of the bank’s net worth, with around 3% having been reported previously.
Excluding these one-time items, IndusInd Bank’s normalized net interest income (NII) fell by 12.5% year-over-year, and the normalized pre-provision operating profit (PPOP) decreased by roughly 25% year-over-year. Additionally, normalized net interest margins (NIMs) were down by approximately 45 basis points quarter-over-quarter, standing at 3.47%.
The reported credit costs were at 2.8%, which included one-off provisions for microfinance institutions (MFIs) of about 2% on an annualized basis. These were partially balanced by a write-back of contingent provisions of 1.5%. Excluding these one-offs and the write-back, the net credit costs as estimated by UBS would have been around 2.3%, compared to 1.9% in the previous quarter. The bank’s gross slippages reached 5.5%, or 3.4% excluding the MFI one-off non-performing assets (NPAs), up from 2.5% in the third quarter. MFI slippages, excluding one-offs, were approximately 20% on an annualized basis, a significant increase from 8.5% in the prior quarter.
UBS analysts believe that the stock’s current pricing does not offer value, trading at roughly 0.8 times the estimated price-to-book value (P/BV) for September 2026, which is a 20% increase from the March lows. The lack of strategic direction, diminished balance sheet growth with low returns on equity (ROEs), and uncertainties surrounding NIMs and credit costs are expected to lead to a de-rating of the stock. As such, the Sell rating and price target of INR600 are being reiterated.
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