IndusInd Q1 net jumps 26% on high fee income, better assets

Core income expanded 38% to Rs 486.5 cr on healthy asset quality as the mid-sized private lender’s net bad loan ratio remained flat at 0.33%

Mumbai

The first quarter earnings season started on a good note for the banking sector with IndusInd Bank reporting 26 per cent growth in net profit at Rs 421 crore supported by stable asset quality and higher other income.

Net interest income of the city-based lender, promoted by the billionaire Hinduja Brothers, rose 17.7 per cent to Rs 800 crore and non-interest income grew 22.5 per cent to Rs 576.4 crore in the three months to June.

Core income expanded 38 per cent to Rs 486.5 crore on healthy asset quality as the mid-sized private lender’s net bad loan ratio remained flat at 0.33 per cent.

However, net interest margin of the bank, which is heavily into vehicle financing, declined marginally to 3.66 per cent from 3.75 per cent on quarter-on-quarter basis.

Commenting on the numbers, Managing Director and Chief Executive Romesh Sobti said, “despite challenging external environment, especially on its staple vehicle financing side, the bank could deliver well on all key parameters. Had it not been for the late June Reserve Bank circular asking banks to make provisions for the loans to unhedged corporates, our net profit would have been higher at 30 per cent.”

Explaining further, he said the bank made a 200 per cent provision for such loans at Rs 20 crore, against the regulatory requirement that would have been Rs 10 crore.

He expressed hope that a good portion of this provision will come back to the bank over the next quarters when RBI allows lenders to pass on a portion of the provisioning to the respective borrowers as financing cost.

Asked whether IBA (Indian Banks’ Association) has finalised a view on such a pass-through, Sobti said the apex body is yet to do so. The bank’s loan book, heavily skewed towards corporate lending at 57 per cent of the total, grew at a healthy 34 per cent and credit expanded at 24 per cent, he said, adding total advances climbed 23.7 per cent to Rs 58,664 crore and the low- cost Casa ratio stood at 33 per cent against 30 per cent. However, the bank would have a balanced loan book from Q3 as its focus is on ramping up its retail book. Already, it among the top three in two-wheeler financing and one of the largest in commercial vehicle lending, he said.

On the asset quality front, gross non-performing assets stood steady at 1.11 per cent in Q1 as against 1.12 per cent a year-ago and 1.06 per cent in previous quarter, while net NPA was unchanged at 0.33 per cent sequentially, which was at 0.21 per cent in corresponding quarter last fiscal.       Gross NPAs of the lender increased 5.4 per cent sequentially (up 29.5  per cent year-on-year) to Rs 654.4 crore and net NPAs rose 6 per cent quarter on quarter (up 93 per cent Y-o-Y) to Rs 195.6 crore during the June quarter.

However, provisions declined to Rs 110.4 crore from Rs 120.5 crore in previous quarter and Rs 132 crore in same period last year as the bank sold Rs 16 crore worth of bad loans to ARCs (asset reconstruction companies) during the quarter under review and made a recovery of Rs 48 crore.

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