IndusInd Bak’s loan book to rise 30% this fiscal too; CEO Ramesh Sobti Explains why

Updated: June 9, 2017 5:22 PM

Private sector lender IndusInd Bank reported a 26% year-on-year increase in its net profit for the June quarter at Rs 661.38 crore, benefitting from an improvement in margins and interest income.

indusInd bankThe bank’s bottom line would have come in close to 30% higher y-o-y had the bank not made a regulatorily-mandated provision towards a standard asset. (Reuters)

Private sector lender IndusInd Bank reported a 26% year-on-year increase in its net profit for the June quarter at Rs 661.38 crore, benefitting from an improvement in margins and interest income.

The bank’s bottom line would have come in close to 30% higher y-o-y had the bank not made a regulatorily-mandated provision towards a standard asset. The bank’s total advances grew by around 30% over the last one year to Rs 77,243 crore as on June 30.
In a post-results interaction with reporters, managing director and chief executive officer Romesh Sobti said that he was confident that the bank’s loan book would continue its 30% y-o-y growth in the current fiscal year as well. Speaking about the individual performance of the various sectors the bank operates in, Sobti talked about his outlook on these sectors going ahead. Excerpts…

Can you tell us a bit about how the commercial vehicles (CV) segment has fared in the last one year?
The CV segment has grown close to 16% over the previous year as against a market growth of around 14%. Growth in the segment has really slowed down in June vis-a-vis April and May; manufacturers have reported around close to 15% degrowth in June compared to the previous months. This is a seasonal issue. We expect the volumes to remain similar in the second quarter, the volumes should pick up but only in the third and the fourth quarter. Looking at various economic parameters, we see the CV segment performing well in the next one year, particularly because of the expected pick up in the mining and road-building sectors.

How did the vehicle finance and non-vehicle finance segments perform respectively?
If you look at our vehicle finance book as a whole, it has grown by around 23% year-on-year. The non-vehicle retail book grew at an even higher click – around 44% over the same period last year. We expect the non-vehicle segment to continue growing at that pace.

How is the recently acquired diamond portfolio performing?
The diamond business has seen some tough times globally but I think the those trying times are behind us now. We have seen growth coming back to businesses. The prices of polished goods have gone up by 7-8% and the prices of roughs has actually gone down, so there has been a rationalisation of prices. Our portfolio has performed exceedingly well; it’s a very good portfolio – both in terms of its earning profile and the profile of the loan book. It’s a very steady loan book in which we haven’t seen any delinquencies. In fact, the interest margin there is better than the interest margin of the bank as a whole.

What kind of return on assets (RoA) and return on equity (RoE) are you currently seeing? Have these parameters improved over the last year?
Yes. So there has been a margin expansion during the quarter; our net interest margin (NIM) improved to 3.97% from 3.94% in the previous quarter. Every quarter, we are improving our margins by 2-3 bps, which is a reflection of three things – changing loan mix, the fixed rate book that we have and the fall in cost of deposits. As NIM increased, RoA also increased, rising to 1.94% from 1.90% at the end of the June quarter last year. We have also improved our RoE, in spite of the large amount of capital that we brought in. RoE is growing at a rate of 60-70 bps every quarter so we are well on our way to bringing our RoE back to around 20%.

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