Private sector lender IndusInd Bank on Wednesday posted a 62% year-on-year (y-o-y) decline in its net profit to `360 crore in Q4FY19.
The plunge in the profit can be attributed to a higher provisions made by the bank on account of its exposure to IL&FS. However, operationally, the bank reasonably fared well with total advances going up 29% y-o-y to `1.8 lakh crore.
The IL&FS account has been now classified as a non-performing asset (NPA) and the total provisions against the exposure so far are of the order of `1,650 crore. In Q4FY19, the provisions were `1,273 crore. The bank has now provided for 55% of its `3,000-crore exposure to the infrastructure lender.
Provisions and contingencies surged 365% y-o-y to `1,560 crore in the quarter and 157.3% quarter-on-quarter (q-o-q), primarily due to the provisions for IL&FS. “We have good reasons to believe there can be a recovery of nearly 90-100% from the IL&FS SPV accounts as the resolution process is under way,” Romesh Sobti, MD & CEO of IndusInd Bank, said at a press conference.
Operationally, the private-sector lender’s pre-provisioning profit improved by 17% y-o-y to `2,067 crore in the reporting quarter, led by a rise of 29% in total income. The net interest income (NII) — the difference between interest earned and interest paid by the bank — grew 11% y-o-y to `2,232 crore.
“During the quarter, we had to account for an interest reversal of `153 crore as the IL&FS account has been classified as an NPA, which has had an impact on the NII and NIMs,” Sobti explained.
According to prudential norms of the Reserve Bank of India, if an account is classified as an NPA in a given year, the interest earned of the account has to be reversed. The lender’s net interest margin (NIM) fell by 24 basis points q-o-q to 3.59%.
The asset quality deteriorated, with the gross non-performing asset (NPA) ratio rising by 93 basis points (bps) y-o-y to 2.1%. It rose by 97 bps q-o-q. The total gross NPAs for the quarter amounted to `3,947 crore. The net NPA ratio rose by 70 bps y-o-y to 1.21% and by 62 bps on a q-o-q basis.
Total deposits rose 29% y-o-y to `1.94 lakh crore. The current accounts and savings accounts (CASA) saw an uptick of 23% y-o-y to `84,070 crore. Sobti said the merger with Bharat Financial Inclusion was in its last stage and it would act as a critical step in expanding services in rural India.