IndusInd Bank announces Q1 results
Last updated: 28 Jul, 2020 | 03:49 pm
- Profit falls 64.37%, beats estimates: IndusInd Bank reported a 64.37% year-on-year (YoY) fall in consolidated net profit of ₹510.34 crores for the quarter ended June, a 64.37% fall from a year ago figure of ₹1,432.50 crores. The net interest income (NII) for the quarter was up by 16% at ₹ 3,309 crores from ₹2,844 crores in the same period last year.
- Provisions: Provisions for Q1FY21 stood at ₹2,259 crores, against ₹2,440 in the previous quarter. For Q1FY20, the provisions were at ₹431 crores.COVID related provisions amounting to ₹500 crores were made in Q1FY21, these are over and above the ₹260 crores COVID related provision made in Q4FY20.
- Asset quality: GNPA% jumped to 2.53% from 2.45% in the March quarter and 2.15% in the June quarter last year. NNP% stood at 0.86% as compared to 0.91% in the previous quarter and 1.23% in the corresponding quarter a year ago. Given the 6 month moratorium imposed by RBI , the picture around NPA’s will only be clear post moratorium, it is expected that there will be significant stress for the banking sector.
- Fundraising: ‘IndusInd Bank’s board approved the issuance of over 4.76 crore equity shares on a preferential basis at ₹ 524 per share to certain marquee investors thus raising ₹2,495.8 crores. Besides this, the bank also approved raising ₹792.15 crores by issuing over 1.51 crore equity shares on a preferential basis at Rs 524 per share to promoter IndusInd International Holdings and Hinduja Capital. In all, “IndusInd Bank will raise Rs. 3,288 crore through a preferential issue of fully paid up 6.275 crore equity shares at a price of Rs 524/- per share.”
- The Bank’s CRAR (including Q1 FY21 profits) is at 15.3% as of 30th June 2020. Subsequent to the proposed capital raise, the post-issue CRAR is estimated to be16.5%
Private sector lenders have been hiking their provisions to protect their balance sheet from bad loans, once the moratorium ends. IndusInd Bank’s provisions rose 5-fold compared to the same period last year. The bank said that on the basis of a stress test, the bank would need to provide around Rs 1,376 crore against stressed assets, of which Rs 1,203 crore worth of provisions have already been made as of June 30.
IndusInd Bank had seen a lot of challenges in the April-June quarter, after veteran Romesh Sobti retired from the bank as CEO in March. Sumant Kathpalia had taken over the reins from April. There were also some concerns regarding the bank’s exposure to certain stressed sectors, leading the shares to plunge to a 52-week low of 235.60 in March (nearly 80% down from all-time high). The bank had clarified that it is financially strong, well-capitalized, profitable, and a growing entity with strong governance. The shares have more than doubled from their March lows.
Our proprietary VGQM model has a HOLD rating on the stock.