IndusInd Bank stock ended in the red on January 18.
IndusInd Bank on January 18 reported 58 percent growth in its consolidated net profit for the quarter ending December 2022 to Rs 1,963.54 crore, beating street expectations by a mile.
The average estimate of five brokerages polled had pegged the net profit for the private sector lender at Rs 1,836 crore for the reported quarter. The lender had reported a net profit of Rs 1,241.39 crore in the corresponding quarter a year back.
On a standalone basis, the lender’s net profit surged 68 percent to Rs 1959 crore from Rs 1161 crore a year ago.
The net profit growth was partly driven by a sharp 37 percent fall in provisions for the quarter to Rs 1,064. 73 crore from Rs 1,654.20 crore a year ago. The fall in provisioning reflects the drop in bad loans for the lender.
Gross bad loan as a percentage of its loan book was 2.06 percent, down from 2.11 percent a year ago. On a net basis, bad loans were just 0.62 percent of its loan book. With a 1.18 percent fall, the gross bad loan pile now stands at Rs 5702 crore as of December, down from Rs 5779 crore a year ago.
Fresh slippages were Rs 1,467 crore for the October-December quarter, down from Rs 1,572 crore a year ago. Fresh stress was largely from its microfinance loan book where gross bad loans rose to Rs 1,153 crore from Rs 885 crore a year ago. The bank’s vehicle finance book too saw an increase in stress albeit mild.
In a press interaction post the results, Sumant Kathpalia, chief executive officer of the bank said that the stress in the microfinance book would be contained over the next two quarters and that of the vehicle finance book would also ease by the fourth quarter of FY23.
Besides low stress, the lender’s net profit was boosted by a healthy 17 percent year-on-year growth in its net interest income to Rs 12,923 crore for the quarter. This came on the back of robust loan growth. In an early business update for the quarter, IndusInd Bank reported a loan growth of 19 percent year-on-year (YoY), faster than the previous seven quarters.
The growth was led by the bank’s lending to small businesses and its vehicle finance book which grew by 18 percent year-on-year. Disbursals in this segment jumped 44 percent year-on-year and the management is optimistic about the prospects in the coming quarters.
Yet another profitability booster was the bank’s stable net interest margin (NIM) despite cost pressures on the liabilities side. IndusInd Bank reported an expansion of 17 basis points in its NIM to 4.27 percent. “We will be able to maintain our NIM even when our cost of deposits goes up,” Kathpalia said in the press interaction.
Given that just 20 percent of the bank’s loan book is priced on marginal cost of funds-based lending rate (MCLR), the pressure from hikes in deposit rates could be limited. Nearly half of the bank’s loan book is based on fixed rate.
The bank’s cost of deposits rose to 5.47 percent from 5.10 percent, reflecting the increase in deposit rates. To be sure, the share of retail deposits is 42 percent which puts the bank at a disadvantage against peers that have a higher share. The management is targeting to increase this share to 43 percent by the end of the current financial year. That said, the low-cost current and savings account share is at a comfortable 42 percent.
Shares of IndusInd Bank ended at Rs 1,221.7, down 0.7 percent on January 18.