IndusInd Bank Q2 outlook: Modest NII and profit growth, margin contraction expected

IndusInd Bank is anticipated to deliver moderate results for the July-September quarter (Q2FY25) as rising deposit costs continue to impact overall performance. For investors looking to buy shares online, analysts expect the bank’s profits to face pressure despite healthy loan and deposit growth. IndusInd Bank is scheduled to release its Q2 results on October 24, 2024.

Key earnings drivers for Q2FY25

Analysts have shared insights into the factors expected to shape IndusInd Bank's performance in the second quarter of FY25.

Growth in loans and deposits

The bank is projected to report robust loan and deposit growth. Analysts from a leading brokerage firm expect loan growth to rise by 15% year-on-year (YoY) to ₹3.6 lakh crore in Q2FY25. Similarly, deposits are predicted to increase by 14% YoY, reaching ₹4.1 lakh crore. This growth indicates sustained demand for financial services, even amid rising operational costs.

Margins expected to moderate

Due to the higher cost of deposits, the bank’s margins are likely to shrink in this quarter. Industry analysts forecast a margin contraction of 21 basis points (bps) YoY to 4.6% from 4.8% in Q2FY24. Rising deposit costs are expected to outpace the yield on advances, limiting the bank's profitability.

Decline in asset quality

The bank’s asset quality is also expected to worsen. Industry analysts predict gross non-performing assets (NPA) to rise to 4.6%, compared to 1.93% in Q2FY24. Credit costs are anticipated to increase slightly by 3 basis points compared to the last quarter, adding pressure to the bank’s overall balance sheet.

Financial outlook and stock performance

IndusInd Bank's net interest income (NII) is expected to rise by 9% YoY, reaching ₹5,533 crore. Meanwhile, profit-after-tax (PAT) is estimated to see a modest growth of 4% YoY to ₹2,207 crore.

In terms of stock performance, shares of IndusInd Bank fell by 1% during the July-September period, underperforming the Nifty 50's 1% gain.

Key takeaways

1. IndusInd Bank's net interest income is expected to grow by 9% YoY.
2. Profit-after-tax is likely to rise modestly by 4% YoY.
3. Loan growth is projected at 15% YoY, while deposits are expected to rise by 14% YoY.
4. Margins to moderate due to rising deposit costs.
5. Asset quality is expected to decline, with gross NPAs predicted to rise to 4.6%.

For those looking to buy shares online, monitoring IndusInd Bank's Q2FY25 results could provide valuable insights into its future performance.