Q2 Results: IndusInd Bank’s Profit Rises 5%, Misses Estimates

IndusInd Bank Ltd.’s second-quarter profit missed estimates as the bank chose to make contingent provisions against its loans to the IL&FS group.

Net profit rose 4.5 percent year-on-year to Rs 920 crore in three months ended September, according to the private lender’s exchange filing. That’s lower than the Rs 1,083 crore estimated by analysts tracked by Bloomberg. Profit grew at the slowest pace in at least a decade. Excluding the contingent provision, underlying profit growth remained at 25 percent, said the bank.

Net interest income, or the core income of the bank, rose 21 percent to Rs 2,203.3 crore, in line with the Rs 2,206-crore estimate.

IndusInd Bank’s asset quality improved during the quarter. Gross bad loan ratio contracted to 1.09 percent from 1.15 percent in the previous quarter. Net bad loan ratio also narrowed to 0.48 percent from 0.51 percent.

Provisions jumped 68 percent quarter-on-quarter to Rs 590.3 crore. In the notes to accounts, the bank said it has made contingent provisions to the tune of Rs 275 crore against its exposure to an “infrastructure account”, which is currently standard.

Speaking at a press conference after the release of earnings, Romesh Sobti, chief executive officer of IndusInd Bank confirmed that the contingent provision was made after assessing the “worst case” scenario that may emerge in the course of resolution of the IL&FS’ group financial troubles. “We may not even take that much of a hit because our exposure is against very specific cash flows,” Sobti said.

When asked whether IndusInd Bank has reassessed its lending to the NBFC sector in the wake of developments at IL&FS, Sobti said that a review of the bank’s exposure to NBFCs had been undertaken as a prudent measure. However, the bank has no intention to stop lending to NBFCs.

The bank saw robust growth in credit during the quarter, with advances rising 32 percent. Corporate advances were up 35 percent year-on-year. Retail advances rose 29 percent. Deposit grew 19 percent year-on-year, with low cost deposits accounting for 44 percent of total deposits.

Shares of the lender, which fell as much as 3.6 percent to Rs 1,592, pared some of the losses to trade at Rs 1,615 apiece after the earnings were announced. The stock has fallen 1.10 percent in 2018 so far compared with a 1.28 percent decline in the NSE Nifty Bank Index.