Private sector lender IndusInd Bank on Friday reported a 37 percent decline in its December quarter net profit at Rs 830 crore on provisions for sour loans and a negligible loan growth. The city-based bank had reported a post-tax net of Rs 1,309 crore in the year-ago period.
For the quarter under review, its core net interest income grew by 11 percent to Rs 3,406 crore on the back of loan book being stable and a 0.03 percent narrowing of the net interest margin (NIM) to 4.12 percent. The other income came down 8 percent to Rs 1,646 crore, which resulted in an only 4 percent increase in the overall income to Rs 5,052 crore.
Even as the income generation faced setbacks, it saw an additional pile-up of potentially sour assets for which it had to set aside money as provisions which in turn ate into the profits. The bank said the gross non-performing assets ratio would have come at 2.93 percent if not for the Supreme Court standstill order on not recognizing NPAs, as against 2.18 percent in the year-ago period and 2.21 percent in September.
The overall provisions rose to Rs 1,853 crore that included Rs 1,100 crore of COVID-related provisions, as against Rs 1,043 crore in the year-ago period, the bank’s managing director and chief executive Sumant Kathpalia said. The bank decided to provide 100 percent of the requirements for unsecured assets, while in the secured ones, it was lower, Kathpalia said.
Over Rs 537 crore of advances on credit cards or nearly 10 percent of the overall portfolio were slippages, he said, adding that much of the cards where slippages have been observed are old customers. He said nearly 2.30 percent of the total assets will have to be restructured by the bank, and it has already approved 0.60 percent and received requests for 1.20 percent.
The restructuring includes two large corporate accounts, one each retail and housing space, he said. Within its mainstay of vehicle finance, only buses and three-wheeler loans are seeing some difficulties but the same will be overcome after restructuring the assets once the movement in the economy begins, he said.
The bank’s exposure to the troubled markets of Assam and West Bengal from a microloans perspective is very low, and the overall collection efficiencies are also rising in the segment to over 90 percent now. Share of retail loans stood at 58 percent as of December, and the same will be maintained between 55-62 percent range in the forthcoming period, he said.
The bank expects a capital infusion of over Rs 2,000 crore from the promoter by February 18 and will not need additional infusion for at least six more months, he said. Any capital will be needed for loan growth purposes or if any inorganic growth opportunity crops up, he said.
The bank scrip closed 5.44 percent up at Rs 846.25 apiece on the BSE on Friday, as against a correction of 1.26 percent on the benchmark.