EXECUTIVE SUMMARY. Indusind Bank not only declared 4QFY2019 results far below consensus expectations, but FY2019 net profits have been inflated by a significant increase in net deferred tax asset (DTA). As usual, the business media and sell-side analysts have ignored the significance of the rise in DTA in inflating profits in the case of HDFC Bank, Yes Bank and now at Indusind Bank. The sell-side, in near unanimity, is bullish on a bank which reported two consecutive years of fudged accounts, and whose credit and risk management made an ill-advised, large unsecured loan to the insolvent IL&FS and the bank consistently guided for a much lower provision for this loan than warranted. The sell-side is, instead, enthused by the bank’s disclosure that its stressed exposure is only 1.9% of its loans. Such is the quality of analysis in an over-brokered market.
In our experience companies adopt liberal accounting policies to cover up flagging fundamentals otherwise there is rarely a valid business reason.
The systemic erosion of public institutions indicates that Vinod Rai, a roaring tiger, has been reduced to a caged parrot, and the BBB’s expiry date is fast approaching. Perhaps the BCCI will turn out to be a more absorbing engagement than the nation’s public sector banks.
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EXECUTIVE SUMMARY. Indusind Bank, once a hot favourite of the market and of institutional investors, is fast losing its lustre. It has...
"It would have been a shocker if RBI would have approved the merger. I am surprised RBI did not announce its decision earlier as the entity was in the news for the wrong reasons,” asserts research analyst Hemindra Hazari.
“In the current faltering economy, the bank is unlikely to increase its net interest margin and its fees to compensate for the expected higher credit costs and if it is unable to continue with its earlier strategy, shareholders should expect a decline in its profitability," Hazari wrote in a note