IndusInd Bank Q2 Results: Profit Slumps 39% On Higher Provisions, Asset Quality Weakens

IndusInd Bank Ltd.'s net profit for the three months ended September fell 39% on a yearly basis due to higher provisions.

The lender's bottom line stood at Rs 1,325 crore on a standalone basis during the July-September period, as compared to Rs 2,181 crore in the year-ago quarter, according to its stock exchange notification on Thursday. The analysts tracked by Bloomberg had estimated the net profit at Rs 2,214 crore. That came after its provisions for the quarter rose 73% quarter-on-quarter to Rs 1,820 crore. On a yearly basis, provisions rose by 87%.

IndusInd Bank Q2 Results: Key Highlights (Standalone, YoY)

• Net interest income up 5% to Rs 5,347 crore.

• Net profit down 39% to Rs 1,325 crore.

• Gross NPA at 2.11% versus 2.02% (QoQ).

• Net NPA at 0.64% versus 0.60% (QoQ).

The bank's total advances rose 13% year-on-year to Rs 3.57 lakh crore. Unsecured retail loans shrank by 6% quarter-on-quarter. Microfinance loans especially shrank by 5% quarter-on-quarter to Rs 32,723 crore.

The growth in unsecured loans was slower as the bank saw higher delinquencies in the portfolio. Outstanding slippages on the microfinance book stood at Rs 2,259 crore, higher than Rs 1,988 crore in the June quarter. Delinquencies in the microfinance book are prominently from Bihar, Jharkhand and Maharastra.

The bank holds contingent provisions worth Rs 1,525 crore outside its provision coverage ratio due to the challenging business environment, according to Sumant Kathpalia, MD & CEO, IndusInd Bank.

IndusInd Bank believes that the microfinance and vehicle finance portfolios should grow in the second half of the fiscal year.

Deposits as of Sept. 30, 2024 were Rs 4.12 lakh crore, an increase of 15% over last year. CASA deposits comprised 35.87% of total deposits as of Sept. 30, 2024, compared with 37% in June. Retail deposits as per LCR stand at Rs 1.81 lakh crores as of Sept. 30, 2024, up by 16% year-on-year.

Higher retail deposit growth and slower retail assets led to a net interest margin contraction. NIM dropped 17 bps quarter-on-quarter to 4.07%.

"In the next few quarters, if microfinance book comes back, by Q2 or Q3, we should see NIMs back at original levels of 4.2-4.3%," Kathpalia told reporters after announcing the bank results.

Return on assets for the bank fell 70 basis points sequentially to 1%. This was due to a "transitory" impact coming from lower asset growth and higher delinquency, Kathpalia said.