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Nomura/Instinet upgraded Indusind Bank Ltd (IIB:IN) to buy from neutral on Monday, raising its price target to INR1,050.00 from INR700.00 as the bank shows signs of recovery following governance and accounting issues.
The upgrade comes after what Nomura described as "turbulent" months for Indusind Bank due to governance failings and accounting lapses. The firm noted that the bank has completed a significant clean-up of its books and taken one-time provisions to address legacy issues.
Nomura highlighted that Indusind Bank’s capital and liquidity position remain healthy with CET-1 at 15.1% and LCR at 118%. The firm also pointed to the bank’s strong retail business model as a factor that should aid faster improvement in profitability over the medium term.
The investment bank increased its FY27-28F earnings per share estimates for Indusind by 14-16%, driven by higher net interest income and lower credit costs. Nomura expects the bank’s return on assets and return on equity to gradually improve to 0.8-1.1% and 7-10% respectively over FY26-28F, compared to 0.5% and 4% in FY25.
Nomura views Indusind Bank’s current valuation at 0.9x one-year forward book value per share as "inexpensive," comparing it favorably to other banks that faced similar challenges in previous cycles but eventually recovered.
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