BackIndusInd Bank April-June net profit up 26%
Net interest income, or income earned from the bank's core lending business, increased 17.83% to `800.66 crore
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Mumbai: IndusInd Bank Ltd on Wednesday said its first-quarter profit rose 25.7%, driven by a 38% increase in fee income.
Net profit rose to ₹ 421.06 crore in the three months ended 30 June from ₹ 334.84 crore in the year earlier, the lender said. Profit was higher than the ₹ 416 crore estimated by a Bloomberg poll of eight analysts. IndusInd is the first bank to announce its earnings for the June quarter.
Fee income for the quarter rose to ₹ 487 crore from ₹ 352 crore in the same quarter last year driven by an increase in earnings from commissions received by selling foreign exchange, fees from trade and remittances, and banking activities such as loan processing.
Net interest income, or income earned from the bank’s core lending business, increased 17.8% to ₹ 800.66 crore from ₹ 679.48 crore in the corresponding period last year. The bank’s advances increased 24% from last year.
Net profit was up despite the bank having to provide an additional ₹ 20 crore on unhedged foreign exchange exposure of companies to comply with Reserve Bank of India norms that kicked in from 1 April.
The extra provision is intended to insulate banks in case of a default by companies particularly in times of high currency volatility.
IndusInd Bank set aside ₹ 110 crore as provisions other than for tax purposes during the quarter.
Romesh Sobti, managing director and chief executive of IndusInd Bank, said the bank had provided more than what was necessary as a prudent measure, but it expects these provisions to return back into a profit. “A lot of this is going to come back, but the extra risk weightages have also hit our capital adequacy ratio," Sobti said.
The bank’s capital adequacy ratio dropped to 13.11% from 14.85% last year.
Sobti, however, expects the bank’s key parameters such as net interest margin (NIM), loan growth and cost of funds to improve in the second half of the year as the economy revives.
NIM, the difference between interest earned on loans and that paid on deposits, narrowed to 3.66% from 3.72% last year.
IndusInd’s margins have been hit due to a slowdown in its high-yielding vehicle finance business that has sagged in the last two years in line with India’s economic growth.
Retail loans under which vehicle finance is bracketed now constitute 43% of the bank’s loan book down from 50% a year earlier.
However, Sobti said he expects a revival in that business after September. “We will see a rebalancing in our book in the second half of the fiscal which will help improve margins," he said, adding that freight rates and daily usage average of commercial vehicles are showing signs of revival.
IndusInd’s net non-performing assets rose marginally to 0.33% from 0.21% last year but were unchanged from the previous quarter.
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