IndusInd Bank conducted conference call on 24 April 2023 to discuss its financial results for the quarter ended March 2023. Sumant Kathpalia, MD&CEO of the bank addressed the call:

Highlights:

The deposit growth was at 15% yoy and 3% qoq. The retail deposit momentum continued with 4% qoq growth to 43% deposits.

Loan growth was at 21% yoy and 6% qoq. All retail businesses had strong qoq growth with vehicle at 5%, microfinance at 9% and other consumer at 9%.

Within corporate, growth was driven by mid and small corporates growing at 7% qoq while large corporate grew by 5% qoq.

Core fee momentum remains robust with 27% yoy & 8% qoq growth

GNPA declined qoq to 1.98% and NNPA 0.59% respectively. Asset quality was healthy in vehicle, consumer and corporate book. Microfinance net slippages were higher by Rs 59 crore.

The restructured book has fallen below 1% and was at 0.84%. Bulk of the restructured is now in vehicle and secured retail assets.

Credit cost for the quarter was 142 bps against 156 bps for previous quarter.

The bank continues to scale-up new initiatives. Affluent segment deposits grew by 23% yoy and NR grew by 28% yoy.

The profitability metrics maintained uptrend with NIMs at 4.28%, RoA of 1.9% and RoE of 15.26%.

Capital Adequacy remains healthy at 17.86% CRAR.

The quarterly net profit crossed 2000 crore mark for the first time in history.

NIM at 4.28% improved by 1 bps qoq, ROA improved by 3 bps to 1.90% and ROE was at 15.26%

Core fee income was strong at 27% yoy whereas trading income was muted.

The bank continues to invest in physical and digital distribution. The retail growth also comes with higher initial cost. The cost to income thus would be around 45% for a few quarters. As the bank leverage the retail growth, the bank should see this down trending towards 41% to 43% levels.

Full year credit cost was at 155 bps for FY2023 against expectation of 120 to 150 bps. The bank had factored in around Rs 1600 crore of utilization from contingent buffer but utilized only 1300 crore.

The year also saw change in RBI regulations for SR provisioning. The bank around Rs 500 crore of SR book provisions during H2FY23. Net of these, the bank was within range for credit cost.

The bank has well diversified loan book across consumer and corporate products. The loan mix has moved in favor of Consumer during the quarter at 54%.

The vehicle loan book growth accelerated to 22% yoy with growth across all vehicle categories.  Disbursements were up 25% yoy to Rs 12500 crore in Q4FY2023 with full year disbursements rising 44% yoy to Rs 46000 crore in FY2023. The disbursement growth was over 30% in CV, construction equipment, utility vehicles and over 20% in cars, two wheelers and three wheelers.

The bank remains positive on the vehicle growth for the next few quarters looking at the healthy utilization levels and demand for used vehicles.

The microfinance businesses rebounded after a few subdued quarters. The disbursements grew by 30% qoq to Rs 11600 crore with healthy new customer acquisitions growing by 17% qoq.

The merchant acquiring business crossed Rs 4000 crore mark growing 30% qoq. The bank now has 594,000 borrowing merchants onboarded. Merchant acquiring now forms 11% of BFIL book.

The corporate portfolio is focused on granular and higher rated customers and delivered another quarter of healthy growth at 6% qoq. The growth was broadbased across segments with large corporates growing at 5% qoq and mid & small corporates growing 7% qoq.

Diamond book is pristine with no asset quality issues.

The proportion of A and above rated customers is now 73% compared to 71% yoy.

The bank saw one restructured account of Rs 175 crore turning NPA for not meeting required covenants in stipulated time. There is no payment delay. Outside this there was no material slippage in corporate.

The consumer banking business continued robust growth at 7% qoq and 26% yoy. The bank saw healthy qoq growth across business banking (up 8%), credit cards (up 10%), personal loans (up 13%) and merchant acquiring (up 30%).

Yield on assets improved by 21 bps with corporate book repricing by 32 bps as well as retail share improving to 54%.

Cost of funds increased by 20 bps, lower than increase in cost of deposits due to lower repricing on borrowings.

Overall margins continue to remain stable around guidance range.

Net SR book reduced to 0.34% of loan book from 0.56% qoq. The bank has made Rs 300 crore provisions for Security Receipt book this quarter.

SMA1+2 book was steady at 0.32% of loan book.

The bank continues to carry strong loan related provisions.

PCR on GNPAs remains healthy at 71%.

Planning Cycle 5 Update & Outcome

The bank has completed final year of Planning cycle-5 in Mar-23.

1. The bank progressed towards building robust retail deposit franchise and share of retail deposits are now at 43% compared to 31% at the PC-5.

2. The bank has realigned the corporate bank approach and steadily pivoted towards growth.

3. The bank continued to leverage deep rural distribution network with holistic offerings via BFIL & Bank.

4. The bank saw recovery in growth following asset quality outperformance and key segments now contribute 42% of loan book.

5. The bank continued scaling-up PC-4 & PC-5 initiatives including Affluent Banking, NRI Banking, Tractor Finance, Affordable Housing & Merchant Loans etc.

Planning Cycle 6 Strategy

The bank has finalised Planning cycle -6 strategy for the next 3 years’ period till FY26. Focus is clear towards getting Growth, building Granularity with relentless focus on Governance i.e. 3G in short.

1. The Bank will continue its sharp focus on retailisation of deposits and aim to increase share of retail deposits to 48%-50% by end of PC-6.

2. The bank will continue to grow key domains while diversifying via launch/ scale-up of new initiatives:

3. Building scale in current sub-scale businesses is one of the key focus area for PC-6.

4. Digital bank has been carved out as distinct business unit focused on delivering innovative customer centric solutions across Individual & MSMSE segments with a goal to build a profitable digital bank.