IndusInd Bank Q3 Results: Profit Rises 17% On Surge In Investment Income
The income from investments rose 31% year-on-year to Rs 1,589 crore in the December quarter, resulting in a jump in total income of the private lender.
IndusInd Bank Ltd.’s third-quarter profit rose, in line with analysts' estimates, due to rise in income on investments.
The private lender's net profit increased 17.2% year-on-year to Rs 2,301 crore in the October–December quarter, according to an exchange filing. Analysts polled by Bloomberg estimated a net profit of Rs 2,277 crore for the quarter.
The income from investments rose 31% year-on-year to Rs 1,589 crore in the December quarter, resulting in a jump in total income of the private lender.
IndusInd Bank Q3 FY24 Highlights
Net interest income up 17.8% at Rs 5,295 crore (YoY).
Net profit up 17.2% at Rs 2,301 crore (Bloomberg estimate: Rs 2,277 crore) (YoY).
Gross NPA: 1.92% vs 1.93% (QoQ).
Net NPA: 0.57% vs 0.57% (QoQ).
The private lender's other income rose 15.4% year-on-year to Rs 2,395 crore in the reporting quarter, with core fee income rising the most.
The bank's net interest margin, a key profitability indicator, stood at 4.29% in the reporting quarter, as compared with 4.27% in Q3 FY23.
The balanced portfolio of corporate as well as consumer loans on the bank's books will keep the margin stable in the near future, according to Managing Director and Chief Executive Officer Sumant Kathpalia.
"We have a natural hedge in a balanced corporate-consumer portfolio," he said. "We have fairly good spread in corporate banking...About 55% of consumer and 44-45% of corporate loans is right mix for us."
Kathpalia expects the net interest margin to remain rangebound at 4.2-4.3% in the coming months.
As of Dec. 31, the bank's capital adequacy ratio stood at 17.86%, down 35 basis points on a sequential basis. The dip is due to the increase in risk weights for unsecured consumer loans by the Reserve Bank of India in November.
Higher risk weights typically lead to a fall in capital adequacy as the bank has to set aside additional capital against such loans.
However, the bank's unsecured loan portfolio is less than 5% of the total loan book, Kathpalia said. The bank is adequately capitalised and will evaluate capital-raising plans by June. "There is no need to raise capital as of now," he said.
The deposits grew by 13% year-on-year to Rs 3.68 lakh crore in the reporting quarter, driven by retail deposits. Total advances maintained the growth rate of 20% in the December quarter as well, at Rs 3.27 lakh crore.
Current account savings account, or CASA, ratio grew by 4% year-on-year.
"We are working towards bringing down credit cost to 100-110 bps in the near future," he added. The bank targets 2% return on assets.
Over the last few quarters, the banking system has been grappling with liquidity shortage, leading to a deposit war among banks. Kathpalia expects deposit growth in the Indian banking system to rise 15-16% in the long-term.
"As interest rate eases, deposit pressure will start easing in the system...repricing in deposits has already started reflecting," he said. He expects the cost of deposits curve to flatten by the June quarter.
The asset quality remained stable in the reporting quarter, with the provisions falling 9% year-on-year to Rs 969 crore.
This resulted in pre-provision operating profit rising by 10% year-on-year at Rs 4,042 crore for the quarter ended December, as against analysts' expectations of only 2% rise in the reporting quarter. The PPOP-to-assets ratio for the quarter ended December stood at 3.41%.
The pre-provision operating profit margin to loans is expected to remain steady at 5%, Kathpalia said in the post-earnings media call on Thursday.
Even though the private bank has an exposure of Rs 113 crore to alternative investment funds, the management has decided to not provide against these investments as they are looking to sell the AIF holdings, Kathpalia said.
"Our exposure to AIFs is at 18% yield, but we are looking to sell these investments...There is enough demand in the market," he said.
The bank reported gross slippages of Rs 1,765 crore, primarily due to "fog in north India and floods in southern part of the country", Kathpalia said. Of this, Rs 1,453 crore came in from the consumer book and Rs 312 crore were in the corporate portfolio. However, the bank is working towards recovery of these loan accounts, he said.
Cost of funds for the bank stood at 5.46% in Q3, as against 4.72% for the corresponding quarter of the previous year.
Kathpalia said that the bank's restructured book declined by Rs 15 crore sequentially due to upgrades and recovery. In the December quarter, the bank sold assets worth Rs 310 crore to asset reconstruction companies.
The net worth of IndusInd Bank in the December quarter was at Rs 58,841 crore, as compared with Rs 50,686 crore in the same quarter a year ago.
Shares of IndusInd Bank closed 1.7% lower at Rs 1,615.75 apiece, as compared with a 0.5% decline in the benchmark Nifty 50. The quarterly results were announced after market hours on Thursday.
