Shares of IndusInd Bank were dropping on Friday after the lender posted a somewhat mixed bag of results for the third quarter, according to analysts.

What Happened: IndusInd Bank posted a 17.1% year-on-year increase in net profit, reaching ₹2,301 crore for the December quarter versus ₹1,963.64 crore earned last year. Higher interest income and reduced provisions, despite fresh slippages in the quarter, drove this growth.

The bank’s net interest income saw an 18% growth, reaching ₹5,296 crore by the end of the quarter. The net interest margin for the third quarter remained flat at 4.29%. The loan book witnessed a 20% year-on-year expansion, reaching ₹3.27 trillion, while deposits grew by 13% year-on-year, totalling ₹3.68 trillion.

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IndusInd Bank’s December quarter results present a mixed picture, with healthy net interest income (NII) and pre-provision operating profit, along with stable margins. However, brokerages noted an increase in both retail and corporate slippages, deviating from the guidance of a build-up, and a drawdown from buffer provisions.

What Analysts Say: Nuvama Institutional Equities highlighted a sharp 20% quarter-on-quarter increase in slippages — the highest in six quarters. Retail slippages occur due to loans against property, agriculture, commercial vehicles, and merchant businesses.

Despite the asset quality miss, the bank’s improving Liquidity Coverage Ratio (LCR) and consistent growth in retail liquidity coverage ratio deposits provide some comfort, the brokerage said. The falling interest rate cycle is also considered a positive factor, it added. The brokerage revises the target price to ₹1,860, anticipating a mildly negative short-term price reaction.

Kotak noted that IndusInd Bank continues to invest in its franchise, leading to elevated cost ratios. While meaningful outperformance seems unlikely, valuations are capped by relative valuations, it said. Despite this, Kotak increased its target price on the stock to ₹1,800 from ₹1,600 earlier.

The management of IndusInd Bank has guided for a loan growth of 18-23% over FY23-26, with slippages expected to normalise at ₹1,200 crore going forward.

Price Action: IndusInd Bank’s share price was down 1.55% at ₹1,587.95 near the start of trade on Friday.

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