IndusInd Bank Q1 Results: Lender Swings Back to Profit After One-Off Losses, Poor Asset Quality Weighs
IndusInd Bank, one of India’s leading private sector lenders, has reported a standalone net profit of Rs 684 crore for the quarter ended June, marking a significant swing back to profit after a one-off loss in the preceding quarter. The bank’s Q1 results come despite poor asset quality, which continues to weigh on its performance.
Poor Asset Quality: A Pain Point for IndusInd Bank
The bank’s gross non-performing assets (NPAs) ratio worsened to 3.64% from 3.13% a quarter ago, while net NPAs rose to 1.12% as of June 30 from 0.95% in January-March. Gross NPAs from microfinance loans, which form 8% of the bank’s total loan book, rose to Rs 5,298 crore, up from Rs 4,531 crore in the prior quarter.
Microfinance Loans: A Pain Point for IndusInd Bank
Microfinance loans continue to be a pain point for IndusInd Bank, with the lender taking a cautious stance on the business segment. According to Soumitra Sen, head of consumer banking, the bank expects slippages from microfinance to stabilise in the third quarter. Slippages might extend to the fourth quarter, but legacy problems should be taken care of, he added.
IndusInd Bank’s Asset Quality: What’s the Impact?
The deterioration in asset quality is expected to have a negative impact on the bank’s profitability in the near term. The bank’s net interest income increased 52% year-on-year to Rs 4,640 crore, but this was offset by a rise in provisions to Rs 1,738 crore. The bank’s net interest margin (NIM) rose to 3.46% from 2.25% in the March quarter, but this is still below the industry average.
IndusInd Bank’s Loan Book: A Mixed Bag
IndusInd Bank’s loan book fell 3% on-quarter to Rs 3.33 lakh crore, with the bank’s vehicle financing business growing mere 1% on-quarter and 7% year-on-year to Rs 96,357 crore. The bank’s corporate banking book decreased 8% on-quarter and 16% year-on-year to Rs 1.32 lakh crore, but the bank expects slippages from corporate lending to improve.
IndusInd Bank’s Future Outlook
IndusInd Bank’s chairman, Sunil Mehta, expressed confidence in the bank’s ability to deliver stable profitability metrics and expects the financial return metrics to still be below potential. The bank’s CEO, said that the bank remains watchful of region-specific weather disruptions but said that diversification should help in sustaining steady momentum.
Key Highlights of IndusInd Bank’s Q1 Results
- Net profit of Rs 684 crore, up from a loss of Rs 2,236 crore in the preceding quarter.
- Provisions down 28% to Rs 1,738 crore versus Rs 2,417 crore.
- Loan book down 3% to Rs 3.33 lakh crore.
- Deposits down 3% to Rs 3.97 lakh crore.
- Microloan book fell 8% to Rs 28,408 crore.
- Net interest margin at 3.46% versus 2.25%.