IndusInd Bank Scores Well On All Parameters In April-June Quarter; Net Profit Grows 27%

IndusInd Bank Ltd.’s profit grew in the June-ended quarter largely due to a rise in its core income even as bad loans rose slightly.

The Mumbai-based bank reported a 26.5 percent jump in profit to Rs 836.5 crore over the year-ago period, according to its stock exchange filing. The number is in line with forecasts of analysts tracked by Bloomberg.

The growth was fueled by an increase in net interest income, Romesh Sobti, chief executive officer of IndusInd, said in a media conference. Net interest income went up 30.8 percent over last year to Rs 1,774 crore.

Overall Reduction In Stressed Assets

Gross non-performing assets for IndusInd rose 16 basis points from the previous three months to 1.09 percent as two accounts slipped from the restructured category into NPAs. Net bad loans rose to 0.44 percent from 0.39 percent last quarter.

However, restructured advances fell from 0.37 percent in the March-ended quarter to 0.17 percent.

Provisions kept aside for bad loans fell 28 percent to Rs 310 crore. The bank reversed the one-time provision of Rs 122 crore that it had made in the March ended quarter for the Jaiprakash Associate account. The company later managed to sell its cement assets to UltraTech Cement and pare some debt. The bank has used that reversal to make a floating provision of Rs 70 crore, retained Rs 33 crore as standard provisioning and provided Rs 20 crore as accelerated provision on its microfinance book and on security receipts, Sobti said.

IndusInd remains one of the better capitalised Indian banks with a capital adequacy ratio of 16.18 percent. That sits comfortably above the Basel III banking requirement, which the Reserve Bank of India is adopting in phases till 2019. The Rs 1,000 crore capital raised by the bank during the quarter and fall in risk-weighted assets helped bump up the capital adequacy in the quarter.

The strategy of building a “higher quality” book seems to be paying off, Sobti said. The bank has no intention of raising capital, he said.

IndusInd Bank’s exposure to the 12 accounts that the RBI has asked lenders to refer for insolvency proceedings stands at Rs 50 crore and the bank has provided for the entire exposure in the April-June quarter.

The bank also has “four to five possibilities” of making acquisitions but none of the proposals have been taken to the board, Sobti said.

Other Highlights

The bank’s net interest margin remained unchanged on a sequential basis at 4 percent and is expected to remain at those levels. Here are other earnings highlights:

• Loan growth: 24 percent year-on-year.
• Deposit growth: 31 percent
• CASA deposit growth: 44 percent
• Core fee income growth: 25 percent

Headwinds For Vehicle Finance Business

Within its consumer finance book, the vehicle financing portfolio grew at a slower 17 percent owing to the launch of Bharat Stage IV emission norms and the drop in truck sales due to the introduction of Goods and Services Tax regime. The next quarter will also see the same pace of growth, Sobti said, adding that the segment will pick up pace only September onwards. Vehicle finance business contributes around 25 percent of the lender’s total loanbook. The non-vehicle portfolio saw a strong growth of 35 percent.

The stock closed largely unchanged at Rs 1,560, after hitting a record high of Rs 1,571 during the day.