IndusInd Bank Internal Review Estimates 2.3% Adverse Impact On Net Worth As Of Dec 2024 | CNBC TV18

Summary

IndusInd Bank is expected to face a decline in stock value due to a recent internal review that identified issues in its asset and liability management, particularly in its derivative portfolio. The review, initiated after new RBI guidelines, revealed a potential impact of up to 2.35% on the bank's net worth. This could lead to a one-time financial hit of around 1580 CR post-tax. Analysts have downgraded earnings estimates and reduced the stock's target price, suggesting short-term valuation pressure despite the bank's healthy capital adequacy ratio.

Takeaways

• 😀 IndusInd Bank is expected to face a potential decline, possibly hitting another 52-week low in trade today.
• 😀 The bank released a statement detailing an internal review of its processes, particularly related to its asset and liability accounts and derivative portfolio.
• 😀 The review has led to an estimated 2.35% negative impact on the bank's network, which could translate to around ₹1580 crores post-tax and ₹2100 crores pre-tax.
• 😀 The bank has appointed an external agency to validate its internal findings regarding the issue.
• 😀 Despite the negative financial impact, IndusInd Bank's capital adequacy ratio (CR) remains healthy, suggesting it can absorb the one-time impact.
• 😀 The review was prompted by new RBI guidelines effective from April 1, 2024.
• 😀 The internal issue has been ongoing for 5 to 7 years and was discovered as part of the review process.
• 😀 Analysts have downgraded their earnings estimates for IndusInd Bank, with reductions ranging from 20% to 25%.
• 😀 MK and Citi have both cut their target prices for the bank's stock.
• 😀 MK has downgraded its rating for IndusInd Bank from 'Buy' to 'Add,' indicating a more cautious outlook for the stock.

Q & A

What is the main reason for IndusInd Bank's potential decline in stock price?

The potential decline is due to an internal review that uncovered discrepancies in the bank's asset and liability management, including its derivative portfolio.

How much of the bank's net worth could be adversely impacted by this issue?

The review could impact about 2.35% of the bank's net worth.

What is the estimated financial impact of the issue in terms of rupees?

The financial hit is estimated to be ₹1,580 crores after tax or ₹2,100 crores before tax.

Has the bank taken any steps to verify the findings from the internal review?

Yes, the bank has appointed an external agency to validate the findings of the internal review.

How long has the issue with the asset and liability management been ongoing?

The issue has reportedly been ongoing for 5 to 7 years.

What prompted the discovery of this issue at IndusInd Bank?

The issue was discovered as part of a review initiated following new RBI guidelines effective from April 1, 2024.

How has the CEO's extension been linked to this issue?

Analysts believe that the CEO's one-year extension may have been influenced by the issue with asset and liability management.

How have analysts reacted to this situation?

Analysts have lowered their earnings estimates for IndusInd Bank by 20-25%, and MK has downgraded its rating from 'Buy' to 'Add.'

What impact is expected on IndusInd Bank's stock in today's trading session?

The bank's stock is expected to potentially hit a new 52-week low due to the news of this issue.

What is the current financial health of IndusInd Bank despite the review findings?

IndusInd Bank's profitability and capital adequacy ratio remain healthy enough to absorb the one-time impact from the issue.