IndusInd Bank’s Q1 Results: A Mixed Bag of News
India’s IndusInd Bank has announced its Q1 results, which show a significant improvement in net profit after a loss in the previous quarter. The lender’s standalone net profit stood at ₹684 crore in the June quarter, as against a loss of ₹2,236 crore in the preceding quarter. This is in line with the expectations of ₹653 crore, according to a poll by Bloomberg.
However, the bank’s asset quality continues to be a concern, with gross non-performing assets (NPAs) rising to 3.64% from 3.13% a quarter ago. Net NPA also rose to 1.12% as of June 30 from 0.95% in January-March.
The bank’s microfinance loans continue to be a pain point, with gross NPAs from this business segment rising to ₹5,298 crore, up from ₹4,531 crore in the prior quarter. The bank’s microloan book, which forms 8% of its total loan book, fell 8% on quarter to ₹28,408 crore.
A Mixed Bag of News for Investors
While the bank’s Q1 results show some respite from the absence of one-off losses seen in the March quarter, underlying pressures on growth and asset quality still weighed on the bank’s performance. The bank’s loan book fell by 3% on quarter to ₹3.33 lakh crore, with vehicle financing, which forms 29% of the bank’s total advances, growing mere 1% on quarter and 7% on-year to ₹96,357 crore.
Consumer banking makes 60% of the lender’s total loan book, and rest 40% constitutes of corporate and commercial banking. Corporate banking book decreased 8% on quarter and 16% on-year to ₹1.32 lakh crore. While it has calibrated loan disbursals on the corporate financing, it is now starting to pick up, according to the bank’s chairman.
Asset Quality Remains a Concern
The bank’s asset quality remains a concern, with gross NPAs rising to 3.64% from 3.13% a quarter ago. Net NPA also rose to 1.12% as of June 30 from 0.95% in January-March. The bank’s microfinance loans continue to be a pain point, with gross NPAs from this business segment rising to ₹5,298 crore, up from ₹4,531 crore in the prior quarter.
What’s Next for IndusInd Bank?
The bank’s chairman has said that the bank has delivered Q1 results without any carry over of prior period irregularities, and financial impact of legacy issues is now behind us. He also said that the bank reported stable profitability metrics and believes that the financial return metrics are still below potential.
The bank’s focus will now be on improving asset quality and sustaining steady momentum in its loan book. The bank has also taken a cautious stance on microfinance, with its head of consumer banking expecting slippages from the MFI to stabilise in the third quarter.
Conclusion
IndusInd Bank’s Q1 results show a mixed bag of news for investors. While the bank’s net profit has improved, its asset quality continues to be a concern. The bank’s focus will now be on improving asset quality and sustaining steady momentum in its loan book. The bank’s cautious stance on microfinance is also a positive sign, and investors will be watching to see how the bank’s performance improves in the coming quarters.
