IndusInd Bank Ltd. pamphlets are arranged for a photograph in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)

IndusInd Bank Profit Jumps 26% On Strong Loan Growth

IndusInd Bank Ltd.’s fourth quarter profit rose in line with street estimates, backed by stable asset quality.

The company’s net profit rose 26.7 percent year-on-year to Rs 953 crore in the January-March quarter, the bank said in an exchange filing today. Analysts polled by Bloomberg had forecast net profit at Rs 964 crore. Net interest income, or the core income from operations, rose 20.4 percent to Rs 2,007.6 crore, marginally beating the forecast of Rs 1,999 crore.

The private bank reported a marginal increase in its bad loans. The gross non-performing assets ratio remained flat at 1.17 percent compared to 1.16 percent at the end of the December quarter.

The lender, however, reported a divergence in non-performing assets at Rs 1,350 crore for the year ended March 2017. At the end of the March quarter, the bank has reported gross NPAs of Rs 1054 crore but the RBI assessed bad loans at Rs 2405 crore, the bank disclosed. According to the lender, some of these loans have already been classified as bad loans, others have been repaid or sold to ARCs. As such, the net impact of the divergence in Q4 FY18 stood at Rs 186 crore, the bank said.

IndusInd Bank Profit Jumps 26% On Strong Loan Growth

Other Financial Highlights:

  • Gross non-performing assets rose 14 percent sequentially in absolute terms to Rs 1,705 crore.
  • Provisions for bad loans increased to Rs 335 crore versus Rs 236.2 crore in the previous quarter.
  • Loan growth remained strong at 28.2 percent, with deposit growth at 19.8 percent.
  • Credit growth was led by a strong surge in vehicle finance.
  • Net interest margin stable at 3.97 percent.
  • Cost to income ratio fell by 1 percent.

The lender has a Rs 385-crore exposure to six of the 40 stressed accounts identified by the Reserve Bank of India for insolvency proceedings. IndusInd Bank has made an aggregate provision of 65 percent against these accounts, Managing Director and Chief Executive Officer Romesh Sobti said in a press briefing to announce fourth quarter earnings.

Addressing concerns that a new stressed framework would lead to an increase in bad loans for banks, Sobti said that the RBI is justified in asking banks to identify stressed accounts immediately upon default agencies.

IndusInd Bank, which has a diamond financing portfolio, had no exposure to Nirav Modi, said Sobti. The bank had a small legacy exposure to Gitanjali Gems, which has been classified as a fraud account. The bank, he said, has been quick to identify exposure to frauds and provide for them.

Cash Crunch

Sobti maintained the bank has not faced any cash crunch at its ATMs. “Of the 2,200 money ATMs that the lender owns, only 26 are not functional due to technical reasons.”

We faced a small cash crunch in Karnataka, following which we flew cash from other centres to ensure that the five ATMs facing crunch were full. We never had empty ATMs.
Romesh Sobti, MD & CEO, IndusInd Bank

This comes after reports of ATMs running dry emerged from across the country, reminiscent of the period following Prime Minister Narendra Modi withdrew old high-value notes worth 86 percent of the currency in circulation to tackle unaccounted wealth in November 2016. In response, the government has stepped up printing of currency notes in the system by five times to tackle the shortage.