IndusInd Bank Posts Lowest Ever Profit Growth In January-March Quarter
The profit was capped by provisions of Rs 122 crore on a standard asset.
IndusInd Bank Ltd. registered its lowest ever net profit growth on account of a one-time provision on a standard asset. The bank thereby missed bottomline estimates in the January-March quarter.
Net profit for the quarter rose 21.2 percent to Rs 751.61 crore from Rs 620.35 crore in the corresponding quarter last year, the bank said in a stock exchange filing on Wednesday. The consensus estimate of analysts tracked by Bloomberg stood at Rs 790 crore.
Net interest income for the private lender rose to Rs 1,667.54 crore against Rs 1,268.3 crore in the year-ago period. The Bloomberg consensus estimate stood at Rs 1,626.8 crore. Net interest margins remained flat at 4 percent.
One-Off Provision Hits Profit Growth
The one-time provision of Rs 122 crore against a large corporate account classified as a standard asset “pursuant to specific RBI advice in this regard” led to a near doubling of provisions on a quarter-on-quarter basis to Rs 430.13 crore, the bank said in a media statement. “The bank's exposure which is due for repayment in June 2017 relates to a bridge loan for a merger and acquisition transaction in cement industry”, the statement added.
“The one-off provision came as a surprise,” Rakesh Kumar, banking analyst at Elara Capital told BloombergQuint. “We will have to understand the need for the provision and when it could get reversed. However, strong NII growth helped performance in this quarter. Barring that, there is also some pressure on calculated margin of the bank.”
Owing to this one-off provision, net credit cost for the quarter jumped to 59 basis points as compared to 17 basis points in the year-ago period.
Stable Margin, Healthy Loan Growth
Net interest margin remained stable at 4 percent, with the management attributing an impact of 45 basis points in the quarter to MCLR. Marginal cost of funds-based lending rate (MCLR) refers to the minimum interest rate of a bank below which it cannot lend.
Loan growth came in at a robust 27.9 percent while deposit growth stood at 36.1 percent.
Asset Quality Stable
The bank’s gross non-performing assets in absolute terms climbed to Rs 1,054.87 crore compared to Rs 971.6 crore on quarter-on-quarter basis, a growth of 8.6 percent. In percentage terms, the figure was 0.93 percent compared to 0.94 percent during the October-December quarter. Net non-performing assets remained flat at 0.39 percent.
MFI Focus
The bank aims to double its operations by 2020, Romesh Sobti, managing director and chief executive officer told reporters at the media briefing, adding that growth will come through organic means.
IndusInd Bank aims to grow its microfinance book to Rs 10,000 crore from Rs 3,000 crore in three years, but organically, he added. The private sector lender has been in talks to acquire microfinance company Bharat Financial Inclusion Ltd. in a share swap, Bloomberg reported on March 9, quoting people with knowledge of the matter.
The stock fell as much as 1.41 percent intraday to Rs 1,411 after the announcement.