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IndusInd Bank will be closely monitored after Crisil refrained from placing it on ratings watch due to derivative discrepancies under review
IndusInd Bank earlier this week disclosed accounting discrepancies in its derivates portfolio related to forex hedging, which could affect its net worth by Rs 1,500 crore.
IndusInd Bank Share Price: IndusInd Bank’s shares were up 1.2% in early trade to their day’s high of Rs 700.80 on the BSE on Thursday after rating agency Crisil decided not to place the private lender under ratings watch. Crisil stated that the full scope of discrepancies in the bank’s derivatives portfolio would only become clear once an external agency submits its report.
Crisil stated that the discrepancies in IndusInd Bank’s derivatives portfolio are expected to have a one-time impact on its financials. However, it added that the bank’s pre-provisioning operating profitability and capital adequacy remain robust enough to absorb the effect. “Crisil Ratings will continue to monitor developments closely for their impact on the bank’s overall credit risk profile,” the agency said.
On Tuesday, Moody’s Investors Service placed IndusInd Bank’s Ba1 Baseline Credit Assessment (BCA) under review for a potential downgrade after the private sector lender disclosed discrepancies in its derivatives portfolio. While Moody’s expects the near-term impact on profitability and capital to be manageable, it raised concerns about the lack of effective internal controls. The agency also noted that stress in the bank’s retail unsecured loan portfolio could negatively impact profitability, capital, and funding.
Moody’s further highlighted the uncertainty surrounding potential leadership changes at IndusInd Bank, noting that leadership shifts, combined with the accounting issues, could pose additional risks.
On March 10, IndusInd Bank revealed discrepancies in its derivatives portfolio, which could reduce its reported net worth of Rs 65,102 crore by 2.35%, or Rs 1,530 crore. This is nearly a third of the bank’s reported net profit of Rs 4,904 crore for the nine months ending December 31, 2024.
Crisil estimates that the bank’s reported tier I capital adequacy ratio of 15.2% as of December 31, 2024, would be impacted by 35 basis points.
