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On Tuesday, JPMorgan analysts downgraded Indusind Bank Ltd (IIB:IN) from Neutral to Underweight, halving its price target from INR 1,100.00 to INR 550.00. The downgrade follows the bank’s announcement of a net loss in its fourth-quarter fiscal year 2025 (4QFY25) results, attributed to various financial challenges including accounting discrepancies, increased loan slippages, and shrinking margins.
The bank’s recent financial report has raised concerns among investors, as it revealed significant accounting irregularities that have triggered regulatory investigations. The lack of clarity on the bank’s recovery trajectory, coupled with a substantial drop in profitability, with a negative return on assets (ROA) of 1.74% for the quarter and a positive but low ROA of 0.5% for the fiscal year, has contributed to the downgrade.
Indusind Bank’s asset quality has also deteriorated, with gross and net slippage rates reported at 5.5% and 5% respectively in the fourth quarter. As the bank continues its search for a new CEO, analysts at JPMorgan anticipate a protracted and sluggish path to recovery.
The analysts highlighted the bank’s focus on capital preservation, with a Common Equity Tier 1 (CET 1) ratio of 15.1%, over expansion due to the need for high provisions and the impact of margin erosion. They also noted that the moderation in deposit growth is likely to limit the bank’s ability to fund new loans.
For the fiscal year 2026, JPMorgan expects Indusind Bank to experience little to no growth and further margin compression. The firm stressed the importance of the bank’s deposit franchise’s resilience during this time of uncertainty.
Concluding their assessment, JPMorgan expressed a cautious stance on Indusind Bank’s future, stating that the recent developments have significantly weakened the investment case for the bank. The analysts pointed to a combination of operational, financial, and reputational risks as the basis for their downgrade and reduced price target.
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