The private sector lender’s stock was trading at its lowest level since January 10, 2017. It has now fallen below its previous low of Rs 1,192, touched on October 11, 2019. In the past six trading days, IndusInd Bank’s stock price has slipped 11 per cent, as compared to a marginal 0.17 per cent rise in the benchmark S&P BSE Sensex.
On February 11, rating agency Moody’s downgraded the private lender’s outlook to negative from stable on account of the risk of further asset quality deterioration.
“Over the last few quarters, the bank has seen deterioration in its asset quality, particularly in the corporate segment. Tight refinancing conditions for borrowers were a key trigger for the crystallization of nonperforming loans (NPLs),” Moody’s Investors Service said.
Refinancing conditions remain tight, especially for weaker borrowers. In particular, the bank has a relatively higher exposure to real estate compared to other banks (at around 8 per cent of its loan book on December 31, 2019. While there have been no NPLs in this segment so far, this exposure to the property market remains a source of risk, given the broader stress in the real estate sector. The bank could also be negatively impacted by the ongoing stress in the telecommunications sector, it said.
The ratings agency did mention that it is unlikely to upgrade the bank’s ratings over the next 12-18 months. An upgrade trigger would be if the bank maintains its NPA ratios at current levels and shows decreased credit costs.
Analysts at JP Morgan believe IndusInd Bank’s exposures to Idea (1.4 per cent of book) and real estate (8 per cent of book) need monitoring in the near term, given elevated risks in both these sectors. Additionally, slowdown in the commercial vehicle sector could pressure NPLs there (Q3 1.65 per cent +22 basis points over year ago), coming off a low base.
“Overall, the bank’s PCR at 53 per cent we note is low vs the other private sector peer group. The bank will also need to provide around Rs 700 crore on account of its exposure to Dewan /Cox (classified as frauds) over the next 3Qs and this could keep credit costs elevated. Key monitorables near term hence will be any large recoveries that it can effect on the IL&FS exposure,” the brokerage firm said in a recent report with ‘neutral’ rating on the stock.
At 01:34 pm, IndusInd Bank was down 2.2 per cent at Rs 1,203 on the BSE, as compared to 0.31 per cent decline in the S&P BSE Sensex. A combined 7.7 million shares have changed hands on the counter on the NSE and BSE so far.