IndusInd Bank shares skyrocket by 10% as its customers choose not to defer paying off loans

• The share price of IndusInd Bank is up by 10% during mid-morning trade.
  
• Even though the private sector bank reported a 16% drop in profit, its customers have been paying off their loans despite the option of a moratorium.
  
• In the short run, analysts believe IndusInd Bank’s performance will be driven by its credit behaviour given that its retail book has a higher proportion of non-salaried customers.
  

IndusInd Bank share price has skyrocketed by 10% after the private sector bank disclosed its earnings on Monday, April 27 — which missed their mark when it comes to profit.

Even though profit took a hit and fell by 16%, the bank reported that its deposits have stabilised during the earnings call.

IndusInd Bank’s provisioning for bad loans was 56.3% higher in the March quarter than a year ago with mostly corporate loans that facing the risk of default. Its net interest margins (NIMs) have increased and most of its customers aren’t deferring payments despite the option of the moratorium, according to the company.

“Stabilisation in liability profile and improvement in asset quality are critical parameters expected to drive performance of IIB’s stock price in the post-COVID scenario,” said a report by research analysts at JM Financial Institutional Securities.

Yet, the surge the share price does not match up to the previous increase which happened after Goldman Sachs bought up 4.1 million of the bank’s shares worth ₹176 crore on April 15. The disclosure led the share price to zoom up to ₹474.7 on April 17.

What made the share price jump?
The Reserve Bank of India (RBI) has given people the option to defer payments on their loans, but according to IndusInd Bank — its customers aren’t going down that route. During the conference call, the bank said it received 96% of non-vehicle portfolio repayments and 95% of repayments of its vehicle portfolio in March. Even in the micro-finance portfolio, the lender received 99% of repayments.

Going forward, the bank expects retail to account for 60% and corporate to account for 40% of its balance sheet by the end of the next financial year.

“Bank’s strategy has shifted towards ‘Retailisation of Balance Sheet’ with focus on improving retail deposit franchisee, increase the contribution of non-vehicle retail loans, and increase the proportion of microfinance business,” according to Philip Capital.

However, in the short run, analysts believe IndusInd Bank’s performance will be driven by its credit behaviour given that its retail book has a higher proportion of non-salaried customers.

See also:
Goldman Sachs bought IndusInd shares after the stock price nearly doubled in 13 trading sessions

IndusInd Bank Q4 net profit down 16 pc at Rs 301.74 cr

IndusInd Bank shares zoom nearly 14 pc after Q4 earnings