IndusInd Bank on Friday reported a 30% rise in its Q2 net profit, along with an improvement in its asset quality and interest margins.
IndusInd Bank on Friday reported a 30% rise in its Q2 net profit, along with an improvement in its asset quality and interest margins. In an interaction with reporters, Romesh Sobti, managing director and CEO, said the lender will significantly bring down its base rate next week.
What has led to the growth in NII and NIM? What is your outlook going forward?
There are a couple of factors that have led to the growth in our NII and NIM. One is the flow of capital that itself gives you a relief in the cost of funding. Second, and more importantly, is the change in the mix of our loan book. We have always said that ideally we would want our retail to be 50% of our book. Because of the slowdown in the vehicle finance over the last two years, we have seen the retail percentage fall from 49% to 41%.
Now, the retail book has grown to 43%. Our target by year end of balancing the book as close as possible to 50:50 now looks reachable. I think as this mix changes in favour of retail, the yield structure will improve.
What are you planning on the base rate front?
Cost of deposits have fallen. Alco has already taken a decision that we will move the base rate significantly down next week. That announcement will come.
We have transmitted the lower cost of funds already and you will see that our yields on the corporate banking as well as the retail banking have fallen.
What has led to the improvement in the asset quality in the second quarter?
The two books are behaving well and, clearly, on the retail side, we are seeing a drop in our slippages. Because of the improvement in the economics of the transport operator and because of freight rates holding up and the drop in the diesel rates, that is certainly reflecting in the reduction in days overdue and in the reduction in our cost of credit on the vehicle financing side.
What has led to an increase in provisions?
There has been a jump of almost R5,500 crore in the standard assets, (and hence) the standard asset provisioning has gone up. That itself is about R24 crore and it is the biggest part you see in the provisions.
What about your fund raising plans? By how much has your cost of funds and yield on assets come down?
We just raised capital in July. We do not expect to go to the markets for another three years. Our hope is to see how we deploy this capital to ensure the growth numbers that we have seen in the past. Our cost of funds have fallen by 49 bps and the yield on assets has fallen by 29 bps and, therefore, the spread has gone up by 20 bps.