IndusInd Bank’s Net Profit Jumps 29% To Rs 751 Crore
IndusInd Bank posted a its highest profit growth in four quarters
IndusInd Bank Ltd. surpassed analysts estimate with the best profit growth in four quarters and steady asset quality in the three months ended December 2016.
Net profit rose 29.3 percent to Rs 751 crore from Rs 581 crore in October to December 2015, according to the company’s filing to the exchanges. Analysts polled by Bloomberg had estimated a net profit of Rs 727.5 crore.
Net interest income, or the core income a bank earns, increased 34.5 percent to Rs 1,578 crore from Rs 1,173.4 crore aided by strong loan growth of 25 percent. Other income rose 21.2 percent to Rs 1,017 crore as against Rs 839 crore earlier.
Gross non-performing assets (NPAs) rose 8.1 percent to Rs 971.62 crore from Rs 899 crore in the July to September quarter. On a year-on-year basis, gross NPAs were 42.6 percent higher than the Rs 681.1 crore reported in the same quarter last year.
As a percentage of total loans, gross NPAs inched higher to 0.94 percent from 0.90 percent in the previous quarter and 0.82 percent in the year-ago quarter.
Net NPAs rose to 0.39 percent of the loan book compared with 0.37 percent in the previous quarter and 0.33 percent in the same quarter last year.
The bank has reported steady numbers amid the demonetisation exercise and digitisation, which has always been in focus, has now become the core area of thrust, the bank’s managing director and chief executive officer, Romesh Sobti said in the earnings statement.
The total business of the bank has increased to Rs 2,21,988 crore and we have maintained our NIM at 4 percent. With positive revival in the economy, there will be an increase in the credit uptick soon. This will reflect in our fourth quarter results. The bank will continue its focus on digitisation as well as responsive innovation to serve our customers.Romesh Sobti, MD & CEO, IndusInd Bank
Shares of the bank reversed losses and closed 0.5 percent higher at Rs 1,165.
Other Highlights
- Net interest margins came in at 4 percent, unchanged from the previous quarter, and up from 3.91 percent in the year-ago period.
- Core fee income growth slowed down to 22 percent year-on-year to Rs 1,363 crore.
- Total deposits rose 38 percent year-on-year to Rs 1.19 lakh crore, in line with the growth seen in the previous quarter.
- CASA ratio increased to 37.04 percent from 34.98 percent in the second quarter.
- Total advances grew 25 percent year-on-year to Rs 1.03 lakh crore, marginally lower than the recent trend, but likely above industry average.
Analysts’ Take
The numbers were in line with expectations, Mayuresh Joshi of Angel Broking told BloombergQuint in a phone interview. He expects more weakness in the bank’s gross non-performing assets over the next one year, but adds that the increase will be limited to a percent.
The numbers were in line with expectations. NIMs have been pretty strong despite expectations that it could taper off to 3.8-3.9 percent. There were no negative surprises because of demonetisation or substantial increase in credit costs. I don’t think the underlying credit costs and gross non-performing assets should increase above 1 percent for the year. Assuming that the bank starts reporting normalised numbers from the first quarter of financial year 2018-19, the valuation premium that it gets should sustain.Mayuresh Joshi, Fund Manager, Angel Broking
Ravikant Bhat of IDBI Capital Markets reiterates that the asset quality weakness is likely to continue going forward.
The profit beat should be considered spectacular given the circumstances...We are definitely tweaking our model to accommodate this earnings bump but do believe there might not be enough grounds yet to make structural changes to (our) model. Gross non-performing assets continued to move up and it confirms our suspicion this trend is likely to continue for some time.Ravikant Bhat, Analyst, IDBI Capital Markets & Securities in his earnings note