IndusInd bank shares in focus as external agency suggests Rs 1,979 cr accounting hit; price targets & more

Shares of IndusInd Bank will be in focus on Wednesday after the private lender, whose shares are down 46 per cent in the past six months, said it received report from external agency regarding the accounting discrepancies relating to derivative deals. IndusInd Bank said the report has quantified the negative impact as of June 30, 2024, at Rs 1,979 crore. 

Based on the findings of the external agency report, the private bank has assessed an adverse post-tax impact of 2.27 per cent on its net worth as of December 2024, attributable to the identified discrepancies. 

This impact, the bank said, will be appropriately reflected in the financial statements for the financial year 2024–25. IndusInd Bank said it remains committed to strengthening its internal controls and would continue to take necessary measures to enhance the oversight and accuracy of its derivative accounting operations.

To recall, the bank had on March 10 disclosed the identification of certain discrepancies in the account balances within its derivative portfolio. The central bank had directed IndusInd Bank’s management to complete all remedial actions during the March quarter and make the necessary disclosures to stakeholders. The bank later disclosed about the ongoing review by an external agency, which was independently reviewing the internal findings.

This triggered a downward revisions in brokerage ratings and targets on the counter. A day ago, BNP Paribas suggested a target of Rs 860 on the stock. Morgan Stanley has reportedly suggested a target of Rs 755 on the scrip, Citi Rs 890 and Macquarie Rs 1,210. 

An internal review conducted by the bank estimated a potential adverse impact of approximately 2.35 per cent on its net worth as of December 2024. The bank also communicated that an independent external agency had been engaged to conduct an ongoing review of the internal findings.

The Reserve Bank of India (RBI) later stated that the financial health of the private lender was stable and under continuous monitoring. In an official release dated March 15, the central bank emphasised that there was no cause for concern among depositors in response to speculative reports at this time.

IndusInd Bank Q4 update

IndusInd Bank reported that its net advances stood at Rs 3,43,298 crore as of March 31, compared to Rs 3,66,889 crore as of December 31, 2024, reflecting a quarter-on-quarter decline. On a year-on-year basis, however, advances registered a growth of 1.4 per cent.

Deposits for the quarter were Rs 3,84,793 crore as of March 31, down from Rs 4,09,554 crore at the end of December 2024. Despite the sequential dip, deposits increased by 6.8 per cent on a year-on-year basis.

IndusInd Bank Q4 results preview 

In its Q4 banking preview, IIFL Securities projected a net loss of Rs 280 crore for IndusInd Bank in the March quarter, compared to a net profit of Rs 2,349 crore during the same period last year. The brokerage also anticipated a potential decline in deposits, attributing it to recently reported accounting discrepancies.

Net Interest Income (NII) is expected to decrease by 7 per cent year-on-year (YoY) to Rs 5,000 crore, down from Rs 5,376 crore in the corresponding quarter of the previous year. Non-interest income is also projected to decline by 13 per cent YoY to Rs 2,170 crore.