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IndusInd Bank Q4 Results: Profit Falls On Higher Provisioning For Covid-19

Net profit fell 16.2% year-on-year to Rs 301.8 crore in Q4 on the back of net interest income that rose 44.7% to Rs 3,231.2 crore.

Pedestrians walk past an IndusInd Bank Ltd. branch in Mumbai. (Photographer: Dhiraj Singh/Bloomberg)
Pedestrians walk past an IndusInd Bank Ltd. branch in Mumbai. (Photographer: Dhiraj Singh/Bloomberg)

IndusInd Bank Ltd.’s quarterly profit missed analysts’ expectations as the lender more than doubled the provisioning for its rising bad loans.

Net profit fell 16.2 percent over last year to Rs 301.8 crore, according to its exchange filing. Analyst estimates compiled by Bloomberg had pegged a profit of Rs 413 crore.

Net interest income—the core income of the bank—rose 44.7 percent over the last year to Rs 3,231.2 crore.

The private lender’s gross non-performing asset ratio rose to 2.45 percent from 2.18 percent in the previous quarter. Net non-performing assets ratio, however, fell sequentially to 0.91 percent from 1.05 percent.

The lender’s provisioning more than doubled over the previous quarter to Rs 2,440.3 crore. “We have made higher provisions to protect the book against the impact of Covid-19,” Chief Executive Officer and Managing Director Sumanth Kathpalia said in a media conference.

The lender has set aside 15 basis points of the overall portfolio as provisioning for the loan moratoriums that have been allowed by the Reserve Bank of India in the wake of Covid-19. The bank’s overall provision coverage ratio stands at 63 percent, he said.

Other Financial Highlights

  • Total capital adequacy ratio at 15.04 percent. Tier-1 capital ratio was at 14.57 percent.
  • Total advances rose 10.94 percent to Rs 2.06 lakh crore.
  • Total deposits rose 3.67 percent to Rs 2.02 lakh crore.

The coronavirus pandemic has led to a slowdown in the offtake of credit, the lender noted. Loan growth, while at 11 percent for the quarter, slowed particularly towards the end of March when the nationwide lockdown was implemented, Kathpalia said.

Still, IndusInd Bank said that its borrower profile is better than the rest of the banking industry. And hence it can expect the quality to hold up better than the rest, the chief executive officer said.

Collections, too, have remained steady with more than 95 percent recoveries in March, Kathpalia said. He added that the bank has been seeing health recoveries in April as well. “We are making sure that collections are on track and ensuring that there are no large delinquencies.”

Kathpalia said the retail share in IndusInd Bank’s loan book has gone up to 56 percent. On the corporate loan book, he said the bank is trying to “granularise” its portfolio. It’s trying to moderate its exposures to large corporate groups and bring down its exposure to particular sectors like commercial real estate and NBFCs.

Highlights From Management

  • Corporate loan book looks low due to regular sell down and recoveries.
  • Visibility on operational efficiency is low currently.
  • SMA-2 book has reduced to 16 basis points.
  • Seeing very few clients coming to us for the moratorium.
  • Have been weary of growing the unsecured portfolio too much. Although have been seeing huge recoveries on that front.
  • Any prediction on loan growth right now would be incorrect.
  • Expecting 50 percent of the country opening up in the second or third week of May. About 25 percemt opening up in the first or second week of June and the rest after that. Taking this scenario in mind, we are expecting not more than 80 basis points rise in gross NPAs.
  • We will be increasing our provisions against stressed accounts. We want to be at 70 percent.

Shares of IndusInd Bank closed 6.4 percent higher, ahead of the earnings announcement, while the benchmark BSE Sensex ended 1.33 percent higher.