IndusInd Bank on Monday posted a 68% year-on-year decline in its net profit for the quarter ended June at Rs 684 crore. The drop came mainly on the back of higher provisions and a fall in asset quality.
In the previous quarter, the private sector bank had reported a loss of Rs 2,236 crore, primarily due to discrepancies found in the bank’s derivatives book.
The bank’s net interest income fell by over 14% on-year to Rs 4,640 crore, while the net interest margin stood at 3.46% in Q1 compared to 2.25% in January-March.
Bloomberg analysts had estimated a net profit of Rs 742 crore and a net interest income of Rs 4,788 crore.
Other income fell to Rs 2,156 crore in the first quarter of this fiscal from Rs 2,441 crore in the corresponding quarter a year ago.
Deposit Growth Flat, Asset Quality Weakens
Growth in deposits was flat on-year and stood at Rs 3.97 lakh crore. Current account and savings account (CASA) deposits were at Rs 1.25 lakh crore, which comprised 31.48% of the total deposits.
Advances fell 4% on-year to Rs 3.34 lakh crore. Within total advances, the vehicle book grew 7% on-year to Rs 96,357 crore, while the micro loan book fell by over 23% on-year and 8% quarter-on-quarter to Rs 28,408 crore.
“The ambition is to show improvement q-o-q on every metric, but we will not be in a position to give you any specific guidance. We are focused on secure businesses like vehicle, retail, mid and small corporates. We are cautious on microfinance,” the management said.
Provisions and contingencies rose 65.5% on-year to Rs 1,738 crore. Total loan-related provisions as on June 30 were at Rs 10,472 crore. The gross non-performing asset ratio stood at 3.64% against 3.13% as on March 31, while the net NPA ratio was 1.12% compared to 0.95% a quarter ago. The provision coverage ratio was stable at 70% as on June 30.
Fresh additions lowered and stood at Rs 2,567 crore in April-June, with slippages mainly from the consumer segment of Rs 2,322 crore.
In the previous quarter, the bank had seen fresh slippages of Rs 5,014 crore. According to the management, the stress in the microfinance book is expected to normalise in the next six months.
Leadership Transition
The total capital adequacy ratio as per Basel III guidelines (excluding Q1 profits) stands at 16.63% compared to 17.04% a year ago.
On the succession plan, Sunil Mehta, chairman of the board of directors of IndusInd Bank, said: “Leadership transition is progressing well, with our final recommendations being submitted to the regulator. The board remains confident of moving forward as per planned timelines.”
RBI recently extended the oversight committee’s tenure at the bank till August 28 or until a new managing director or chief executive is appointed.
Mehta said the bank has resolved all issues relating to the legacy, treasury and microfinance issues which were identified in the previous quarter. The bank has also set up a project management hub tasked with the benchmarking the internal control processes and policies of the bank with best practices and to bridge gaps if they exist.
Asked about any plans of the promoter increasing its stake in the bank, the management said the talks may be happening between the regulator and the promoter and that the bank has no information regarding this.
Shares of the bank closed 2.9% lower at Rs 799.60 on the NSE on Monday.