IndusInd Bank Ltd has turned out to be another dependable performer in the banking sector, bringing comfort to investors with consistent results, regardless of the slowdown in the economy.
Net profit grew by a hefty 45% in the quarter ended September from a year earlier. Net interest income (NII) rose 27%, while net interest margin fell a bit to 3.35% from 3.41% in the June quarter.
The bank has been able to keep the squeeze in margins to a minimum, thanks to repricing of assets and changing the mix between consumer and corporate loans to favour the more high-yielding consumer segment. Consumer loans now account for 47% of its portfolio, up 2 percentage points from the June quarter. The bank management believes margins have more or less bottomed out.
Good growth in fee income and trading profits added to the total income, with year-on-year (y-o-y) operating profit growth at 27%. The need for provisions, though, was well below that required in the year-ago period. The upshot was that growth in net profit was a much higher 45%.
Of course, y-o-y growth has been decelerating at Indusind Bank, too, in tandem with the slowing economy. For instance, advances growth was 31% in the June quarter, deposit growth was 29%, NII growth was 32% and growth in operating profit was 35%.
In the September quarter, growth in advances slowed to 28%, while deposit growth decelerated to 23%. Similarly, y-o-y growth in the other parameters, too, went down a bit.
Does this indicate a trend, and will growth trend even lower in the future? The management doesn’t think so and says it is looking at the loan book growing 25-30% annually for the next three years.
IndusInd’s current and savings (Casa) deposits fell a bit from 28.2% of the total deposits in the June quarter to 27.7%. But that’s likely to be true of the entire banking system, as depositors shifted out of Casa deposits to term deposits, attracted by higher interest rates.
The bank’s stellar track record has earned its stock a premium valuation. There is no reason why that shouldn’t continue and even improve in future.