Q2 Results: IndusInd Bank’s Profit Meets Estimates Despite Higher Provisions
Fresh off its merger with Bharat Financial Inclusion, IndusInd Bank’s net profit met analysts’ estimates in the second quarter.
IndusInd Bank Ltd.’s net profit met analyst estimates in the quarter ended September even as provisions rose for the lender, which is fresh off its merger with Bharat Financial Inclusion Ltd.
Net profit stood at Rs 1,383 crore, according to the lender’s exchange filing. That’s largely in line with the Rs 1,417-crore consensus estimate of analysts tracked by Bloomberg. Net interest income, or the bank’s core income, was Rs 2,910 crore—also in line with the Rs 3,003-crore estimate.
The year-on-year figures aren’t comparable due to IndusInd Bank’s merger with Bharat Financial Inclusion in the previous quarter.
The merged entity’s asset quality remained steady during the second quarter. Gross bad loan ratio expanded to 2.19 percent from 2.15 percent in the previous quarter. Net bad loan ratio contracted to 1.12 percent from 1.23 percent in the same period.
Provisions against bad loans rose 73 percent over last quarter to Rs 737.71 crore. Provisioning coverage ratio moved up to 50 percent versus 43 percent in the previous quarter.
The accelerated provisions were made to “take care of future requirements” and not because of fresh slippages, Chief Executive Office Romesh Sobti said at a conference to announce the bank’s earnings.
IndusInd Bank had a Rs 3,003-crore exposure to IL&FS Group as of 2018-19 at a time when surprise defaults sparked liquidity crises in the country’s NBFC, automobile and real estate sectors. IndusInd Bank had two other corporate exposures over the last few quarters.
The company now expects its stressed diversified corporate exposure to fall over the next 10 days to 0.8 percent from 1.1 percent of its loan book, Sobti said.
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IndusInd Bank Q2 Results: Other Highlights
- SMA-2 (special mention accounts) at 58 basis points vs 17 basis points, quarter-on-quarter.
- Slippages at Rs 1,102 crore vs Rs 725 crore QoQ.
- On target to operate 2,000 branches by March 2020.
- Used benefit of corporate tax cut to boost provision coverage.
- Vehicle finance book grew by 21 percent year-on-year.
- Unsecured retail loans are growing fine and we have slowed down LAP (loan against property) products.
- Overall NBFC and real estate book is steady
- NBFC SMA-2 is at Rs 257 crore and the company expects full repayment by October 2019.
- Total corporate banking SMA-2 exposure is at Rs 1,082 crore.
- Total SMA-2 stands at Rs 1,143 crore.
On Thursday, IndusInd Bank shares fell 6.15 percent to Rs 1,228.95 apiece while the benchmark Sensex lost 0.78 percent to end the day at 37,880.40 points.
