Core Income Growth, Lower Provisions Help IndusInd Bank Post 22 Pc Jump In Q2 Net Profit

IndusInd Bank reports 22% growth in net profit for the September quarter, due to a surge in core income and lower provisions. Its managing director and chief executive Sumant Kathpalia expects the bank to maintain a net interest margin of 4.2-4.3% in the future.
Core Income Growth, Lower Provisions Help IndusInd Bank Post 22 Pc Jump In Q2 Net Profit

IndusInd Bank on Wednesday reported a 22 per cent growth in the September quarter net profit at Rs 2,202 crore on the back of a surge in core income and also dip in provisions.

The city-headquartered private sector lender had reported a net profit of Rs 1,805 crore in the year-ago period.

Its core net interest income increased 18 per cent to Rs 5,077 crore on the back of a 21 per cent jump in advances. The net interest margin widened to 4.29 per cent in the period under review, from 4.24 per cent in the year-ago period.

Its other income increased to Rs 2,282 crore during the reporting quarter, as compared to 2,011 crore in the July-September period last year.

Its managing director and chief executive Sumant Kathpalia said the bank could manage to expand NIMs despite a 0.23 per cent increase in the cost of deposits during the quarter, and added that the bank is able to withstand the pressures coming by way of jump in deposit rates amid what the industry calls as 'war for deposits'.

The bank is able to do so because of the mix of its loan assets and the costs of borrowings, he said, adding that it aims to maintain the NIMs in the 4.2-4.3 per cent range in the future.

The bank's deposit rate grew by 14 per cent during the quarter.

Kathpalia said spends in distribution, people and technology have increased the cost-to-income ratio to over 47 per cent, but exuded confidence of getting the same down in the second half, saying such investments start reaping benefits in 2-3 quarters.

It hired over 3,500 employees during the quarter, he said.

Share of the personal loans and credit cards – which form the unsecured book the RBI has cautioned against – stands at over 5.2 per cent of the overall loanbook, and the bank will not grow the same aggressively given the fact that microfinance accounts for 11 per cent of the book, Kathpalia said.

On the asset quality front, the gross non performing assets ratio improved to 1.93 per cent from the 2.11 per cent in the year-ago period.

Kathpalia said there was one lumpy corporate account with a Rs 168 crore exposure which slipped into NPA during the quarter.

The overall provisions dipped to Rs 973.81 crore from the year-ago period's 1,141.05 crore, helping the bank's overall profits.

Its overall capital adequacy stood at 18.21 per cent as of September 30, 2023, Kathpalia said, adding that internal accruals will be sufficient to fund its capital needs for the next 4-6 quarters.

He said the bank is yet to hear from the regulator on its promoter's intent to increase stake in the lender, and reiterated that it is not needing any capital.

When asked about a promoter group entity emerging as the successful bidder for Reliance Capital, Kathpalia said the bank will get intro distribution arrangements for the latter's mutual fund and insurance offerings, but stressed that it will continue to have an open, non-exclusive architecture.

The IndusInd Bank scrip closed 0.97 per cent down at Rs 1,420.80 a piece on the BSE on Wednesday, as against a 0.83 per cent correction on the benchmark.

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