IndusInd profit up 30% but provisions rise
Mumbai: IndusInd Bank Ltd, a part of the London-based Hinduja Group, reported a 30% increase in fiscal third-quarter net profit on Friday as higher interest and fee income helped it counter a sharp rise in bad-loan provisions.
Net profit rose to Rs.347 crore, or Rs.6.50 per share, in the three months ended 31 December from Rs.267 crore, or Rs.5.40 per share, in the year-ago quarter. The profit was higher than the Rs.333 crore estimated by a Bloomberg poll of 20 analysts. IndusInd is the first bank to announce its results in the current earnings season.
Profit rose despite a 59% increase in provisions to cover non-performing assets (NPAs). Such provisions increased to Rs.126 crore from Rs.79 crore in the quarter ended December 2012. Gross NPAs increased to Rs.626 crore from Rs.422 crore in 2012, or 1.18% of total loans from 0.99% a year ago.
Banks have been setting aside more money to cover the risk of default on bad loans as slower economic growth and stalled projects make it difficult for corporate borrowers to service debt. Economic growth averaged 4.6% in the six months to 30 September after 5% growth in the last fiscal, the slowest pace in a decade.
IndusInd managed to offset the impact of the bad-loan provisions with a 20% increase in interest income to Rs.1,739 crore in the December quarter from Rs.1,455 crore a year ago; earnings from fees and other customer charges rose 35% to Rs.480 crore from Rs.356 crore.
The results were in line with market expectations, but the higher provisions and the uptick in gross NPAs has led to caution among investors, said S Ranganathan, head of research at LKP Securities Ltd.
IndusInd Bank shares ended the day 3.17% down to Rs.403.60 on BSE, while the benchmark Sensex rose 0.22% to 20,758.49 points. The BSE Bankex was down 1.54% to 12,338.80 on Friday.
“They have done a very good job in the present environment and a 24% loan growth is commendable. But in the current economic scenario analysts are keeping a close eye on bank NPA numbers which has led to some selling pressure on the stock today,” Ranganathan said.
IndusInd’s loan book grew 24% year-on-year, faster than the banking system’s 14.5% growth over that period, riding on a 34% increase in corporate advances. The bank mostly offers short-term working capital loans to companies.sixthMAds
Consumer finance loans, which consist of loans for the purchase of commercial vehicles and cars, rose at a much slower 14%.
Deposit growth was sluggish and below the industry average with deposits rising 10% to Rs.56,247 crore. Low-cost current and savings accounts (Casa) accounted for 32% of the total deposit base of the bank as on 31 December.
Romesh Sobti, managing director and chief executive officer of the bank, said the lender had improved its net interest margin (NIM) compared with last year. IndusInd’s NIM, the difference between the interest rate charged on loans and that paid for deposits, improved to 3.65% in the quarter gone by from 3.46% a year ago. It was unchanged from the preceding quarter.
The steady NIM reflected a higher yield on advances although the bank’s cost of funds increased marginally. IndusInd’s cost of funds increased to 7.08% in December 2013 from 6.95% in September 2013.
The yield on advances improved to 13.76% from 13.50% in the same period, a presentation on the bank’s website showed.
Sobti said the bank’s plan to take its total number of branches to 625 by the end of March 2013 remained on track. “We have 573 branches currently and expect to achieve our targeted branch expansion by the end of the fiscal,” Sobti said.