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Q4 Results: IndusInd Bank Profit Misses Estimates On Higher Provisions For IL&FS

IndusInd Bank’s net profit fell 62 percent year-on-year to Rs 360 crore during the March quarter. 



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

IndusInd Bank Ltd.’s quarterly profit missed estimates as it categorised loans to the Infrastructure Leasing and Financial Services group as non-performing, leading to an increase in provisions.

Net profit fell 62 percent year-on-year to Rs 360 crore in the quarter-ended March, according to the private lender’s exchange filing. That’s compares with the Rs 710-crore consensus estimate of analysts polled by Bloomberg.

Net interest income, or the bank’s core income, rose 11 percent year-on-year to Rs 2,232 crore—in line with the Rs 2,410-crore estimate.

IndusInd Bank’s asset quality worsened during the three months ended March. The gross non performing assets ratio rose to 2.1 percent at the end of March 2019 from 1.13 percent in December 2018. The net NPA ratio, too, rose to 1.21 percent from 0.59 percent.

In absolute terms, gross bad loans jumped to Rs 3947.41 crore at the end of March compared to Rs 1968 crore in the previous quarter. Much of the jump was on account of exposure to IL&FS. IndusInd Bank has an exposure of Rs 3004 crore to the infrastructure group, of which Rs 2000 crore is to the holding company.

With the account now classified as an NPA, IndusInd Bank stepped up provisions to cover for the loan. Provisions more than doubled to Rs 1,560.7 crore over the previous quarter.

The lender has now provided for 55 percent of its total IL&FS exposure worth Rs 3,000 crore.

“We have good reasons to believe and there are indications in the market that there could be 90-100 percent recovery on this particular exposure,” Romesh Sobti, managing director and chief executive officer at IndusInd Bank, said in an earnings press conference. The issues pertaining to the group will be “put behind” in the fourth quarter of the 2019-20, he said.

Despite the increased provisions, the bank’s provision coverage ratio, which reflects the strength of the bank’s balancesheet, stood at 55 percent. A provision coverage ratio of about 70 percent is considered healthy.

Operational Performance

The bank saw strong growth in advances and deposits during the quarter.

Total advances rose 29 percent to Rs 1.86 lakh crore at the end of March. Total deposits increased 29 percent to Rs 1.94 lakh crore.

The net interest margin fell to 3.80 percent for FY19 compared to 3.99 percent last year. The fall in margins and the slower-than-trend growth in net interest income was on account of a write-back on interest earned on IL&FS related accounts, said Sobti.

Core fee income for the fourth quarter stood at Rs 1419 crore, an increase of 27 percent over the corresponding quarter last year.

The company also announced a dividend of Rs 7.50 per share.

Shares of IndusInd Bank erased losses and rose as much as 6 percent as of 2:05 p.m. after the earnings announcement compared to a 0.5 percent gain in the Nifty Index.

Q4 Results: IndusInd Bank Profit Misses Estimates On Higher Provisions For IL&FS