IndusInd Bank Q2 result update!
Last updated: 30 Oct, 2020 | 02:48 pm
- Profit falls as provisions spike: Net profit fell 53% yearly to ₹663 crore for the quarter ended Sep-20, in line with the street’s consensus estimate of ₹ 611 crore. In the quarter ended June, the bank reported a net profit of ₹510 crore. This was led by a sharp increase in provisions, as they spiked by 166% yearly to ₹1,964.44 crore, consequently leading to an increase in the Provision Coverage Ratio to 77% in September 2020 from 50% in September 2019. As of September 30, IndusInd held COVID provisions of ₹2,155 crore (including provision made during the quarter of ₹952 crore).
- Operating performance: Net Interest Income grew by 12.7% yearly to ₹3,278 crore whereas Net Interest Margin stood at 4.16%. Deposits grew to ₹2.28 lakh crore from ₹2.11 lakh crore in the previous quarter whereas advances increased 2% yearly to ₹2.01 lakh crore. IndusInd Bank’s fee income stood at ₹1,554 crore for the Jul-Sep period, as against ₹1,727 crore for the same period a year ago. The chart below shows IndusInd Bank's revenue from various segments.
- Asset Quality: Asset quality remained stable with Gross non-performing assets at 2.21% of gross advances as against 2.19% a year ago. On account of the higher level of prudential provisioning, the net non-performing assets were 0.52% of net advances as compared to 1.12% on September 30, 2019.
- Update on moratorium: The RBI had permitted banks to offer a moratorium to borrowers until the end of August to help them mitigate the impact of the pandemic. Following this, the Reserve Bank of India in September permitted one-time restructuring of advances of companies and retail borrowers hit by the Covid-19 pandemic. While these assets don’t have to be marked as NPAs, banks have been asked to disclose details of the restructured assets.The GNPA ratio as per said IRAC norms at September 30, 2020, would have been 2.32% and Net NPA ratio would have been 0.61%. IndusInd’s CEO Mr. Sumant Kathpalia said that “We believe the share of restructured accounts will be in the low single digits over the entire loan book, Currently the efficiency of our collection has improved to 94.7% and we expect this to improve to 96-97%. The rest can be seen as the bank’s stressed portfolio.”
IndusInd Bank has clearly maintained its cautious stance by sharply increasing provisions and has indicated that the current environment is highly uncertain. However as the economy is gradually recovering, concerns around the retail book (57% share in total revenue) are fading away. CEO Kathpalia said that “Going ahead, the bank will continue to make provisions against the pandemic as the need arises.”
Operational performance remained tepid with muted growth in advances and deposits. The bank has not been able to match the performance of its competitors like HDFC Bank and Axis Bank, who have recently declared stellar results.