Private sector lender IndusInd Bank reported a 64.4% year-on-year rise in net profit to Rs 1,603.29 crore for the quarter ended June 2022, amid healthy growth in net interest income (NII) and lower provisions for its bad loans. 

NII up 16%

NII grew 16% YoY to Rs 4,125 crore. Even sequentially the NII grew 4% as it balanced the pricing of both its liabilities and assets. 

Non-interest income grew 12% to Rs 1,932 crore.

Net interest margin (NIM) rose to 4.21% from 4.06% a year ago as the yields on the assets improved.

Total provisions fell 30% year-on-year to Rs 1,250.99 crore towards bad loans during the quarter.

“The first quarter witnessed turbulent operating environment with inter-linkages of inflation, reversal of accommodative monetary policy and Russia-Ukraine conflict playing out,”  managing director and chief executive officer Suman Kapathalia said  in a media call.

“Our asset mix is conducive to achieve a NIM of 4.15-4.25% . The bank is confident of delivering on that range for the year, even as deposit rates are on the rise amid the Reserve Bank of India’s monetary tightening cycle,” Kapathalia added.

Advances up 18%

The bank’s total loan book grew 18% YoY to Rs 2.48 trillion, from Rs 2.11 trillion a year ago.

 Kathpalia said that while the bank’s guidance for credit growth is for a compound annual growth rate per year of 16-18%, the aim is to achieve 20% growth in the current year so as to “catch up” from 12% in the previous year.

The corporate loan book grew 23.8% YoY. Vehicle finance book grew 8% YoY as disbursements more than doubled. 

Deposits up 13%

As on 30 June 2022, IndusInd Bank’s deposits were at Rs 3.02 trillion, 13% higher than the Rs 2,67 trillion deposits the bank held a year ago.

CASA (Current account savings account) deposits, which are low-cost, rose to Rs 1.30 trillion as on 30 June 2022, with the share of current account deposits at Rs 35,265 crore and that for savings accounts at Rs 95,243 crore.

CASA deposits comprised 43% of total deposits as on 30 June 2022, the bank said. 

Sensing opportunities from the Reserve Bank of India’s recent relaxations on non-resident external account deposits, the bank is trying to garner more NRE deposits. To attract dollars, the  RBI had said that beginning 30 July 2022,banks need not  maintain cash reserve ratio (CRR) and statutory liquidity ratio (SLR) on incremental deposits flowing into FCNRB (foreign currency non-resident bank) and NRE deposits. The relaxation is applicable for deposits mobilised until 4 November.

“We don’t give numbers (on NRE deposits) but we are assessing the market and we should be able to ramp up,” Kathpalia said. “We have a large FX book and can convert to local currency with the swap cost, and it will still be cheaper than what we get in the domestic market. Right now, we believe that we have the right rates -- our rates will be 50-75 basis points higher than the market and that’s where we will be.”

Asset quality

The bank’s gross non-performing assets (NPAs) fell 4% YOY to Rs 5,932.90 crore. As a percentage of the lender’s total loan book, gross NPAs were at 2.35% of gross advances as of 30 June 2022, against 2.27% in the preceding quarter. 

Net NPAs stood at 0.67% of net advances as of 30 June 2022 compared to 0.64% quarter ago. It was lower from 0.84% as of June 2021 quarter.

Fresh slippages totalled Rs 2,250 crore for the quarter. While fresh additions from corporate loans stood at Rs 603 crore, Rs 1,647 crore was from the bank’s retail book.  The bank upgraded Rs 363 crore of loans, out of which Rs 169 crore was from the corporate segment and Rs 193 crore from the retail loan book. 

The bank had recoveries of Rs 20 crore from the corporate book and Rs 222 crore from the retail book. The total write-off was Rs 1,230 crore of loans, with Rs 449 crore coming from the corporate segment and Rs 781 crore from the retail portfolio.

“The bank’s write-offs remained elevated and upgrades and recoveries dropped sharply,” said Kathpalia. 

The bank has not sold any bad loans to asset reconstruction companies (ARCs) during the quarter.

The microfinance loan book, which shrank marginally from the previous quarter, had 3.38% of the portfolio turn non-performing in the fiscal first quarter, a sharp jump from 2.45% in the previous quarter. Two-wheeler loans had the highest NPA ratio of 7.78% but they were down on a sequential basis. 

Provisions and other income

Provision coverage ratio stood at 72% as of 30 June 2022. Provisions and contingencies for the quarter ended June stood at Rs 1,251 crore compared to Rs 1,780 crore a year ago, down 30% YoY. Total loan-related provisions stood at Rs 8,370 crore (3.38% of loan book).

Other income grew 12% YoY to Rs 1,932 crore. The core fee of the bank grew 47% YoY to Rs 1,786 crore, from Rs 1,214 crore a year ago. 

Distribution network

As of 30 June 2022, the bank's distribution network included 2,286 branches/banking outlets and 2,783 onsite and offsite ATMs. The comparative year-ago figure of branches/banking outlets was 2,015 while onsite and offsite ATMs stood at 2,870. The client base stood at 32 million as of 30 June 2022.