IndusInd Bank net falls 34% YoY on higher provisions

IndusInd Bank’s net profit fell 34.4% year on year (YoY) to Rs 853 crore in the December quarter as a result of a 78% jump in provisions to Rs 1,854 crore. The bank also registered interest reversal in some accounts. Its net interest income (NII) increased 11% YoY to Rs 3,406 crore and net interest margin (NIM) fell four basis points (bps) sequentially to 4.12%.

Sumant Kathpalia, MD and CEO, IndusInd Bank, said the lender reversed interest income on bad assets, which remained unrecognised as a result of a September 3, 2020, judicial stay and these reversals were to the tune of Rs 185 crore. “Adjusted for this, NII and PPoP (pre-provision operating profit) growth would have been 17% and 14% YoY, respectively,” he said.

The bank’s pro forma non-performing assets (NPAs) stood at Rs 6,159 crore and it made provisions to the extent of Rs 4,722 crore, or 77%. “We have provided completely for the unsecured business, or the microfinance business, where we think the losses may be a little elevated. Having said that, in the corporate side of the book and the retail side, we do not expect losses,” Kathpalia said.

The bank has approved restructuring for 0.6% of its loan book and the process has been invoked for another 1.2% of its book, consisting largely of corporate loans. It expects another 0.3-0.4% of the book to undergo one-time recast as the window for micro, small and medium enterprises (MSMEs) remains open till March 31, 2021. “Our guidance to the market has always been 2.5-3%. We’ll come much below that target,” Kathpalia said.

Gross NPAs stood at 1.74% of advances as on December 31, 2020, down from 2.21% as on September 30, 2020. The net NPA ratio stood at 0.22% of net advances as on December 31 down from 0.52% on September 30. If the bank had recognised NPAs following income recognition and asset classification (IRAC) norms after August 31, 2020, the pro forma gross NPA ratio would have been 2.93% and the pro forma net NPA ratio would have been 0.7%.

The advances book shrank marginally on a y-o-y basis to Rs 2.07 lakh crore as on December 31, 2020, and total deposits rose 10% YoY to Rs 2.39 lakh crore. Current account savings account (CASA) deposits comprised 40.4% of total deposits as on December 31, 2020, down from 42.4% a year ago.

IndusInd Bank’s shares closed at Rs 846.25 on Friday on the BSE, up 5.44% from their previous close. The results were declared after the close of trade.