IndusInd Bank conducted conference call on 18 October 2023 to discuss its financial results for the quarter ended September 2023. Sumant Kathpalia, MD&CEO of the bank addressed the call:

Highlights:

Loan growth continues to be strong at 21% yoy and 5% qoq, driven by retail segment growing 25% yoy and 6% qoq growth with healthy disbursements in vehicle and microfinance businesses and maintaining traction in other consumer products.

The corporate book too grew by 18% driven by small corporates.

The bank has maintained growth trajectory on the retail deposit mobilisation in spite of the competitive intensity.

The share of retail deposits improved to 43.7% driven by 21% yoy and 4% qoq growth in retail deposits.

Overall the bank achieved total deposit growth of 14% yoy and 4% qoq driven by granular retail growth.

Loan book under merchant acquiring business via BFIL grew 16% qoq to Rs 4904 crore.

The retail net slippages reduced from Rs 1059 crore to Rs 865 crore qoq, while corporate slippages increased due to one account slipping into NPA.

Restructured book reduced by Rs 274 crore to 0.54% from 0.66% qoq.

NNPA is at 0.57% with provision coverage ratio stable at 71%.

The contingent provisions are at Rs 1520 crore with total loan related provisions at 118% of GNPAs.

The credit cost has reduced to 123 bps from 132 bps qoq.

Net Interest Margin remains steady at 4.29%.

Client fee income grew by 13% yoy driven by continued retail momentum.

The bank invested in digital launches, marketing spends as well as physical infrastructure resulting in Opex growth of 6% qoq. PPOP margin to loans thus was at 5.2% in Q2FY2024 against 5.5% in Q1FY2024.

Return on Assets was at 1.90% and Return on Equity was at 15.33% for Q2FY2024.

Capital Adequacy Ratio remains healthy with CET1 of 16.33% and overall CRAR at 18.21%.

The bank had healthy liquidity position during the quarter with average LCR at 117% and average surplus liquidity at Rs 37000 crore for the quarter.

Vehicle Finance:

The vehicle finance grew 5% qoq and 22% yoy with disbursements rising 20% yoy.

The gross slippages in vehicle improved to 0.64% qoq from 0.77%.

The restructured book in vehicle finance also reduced to Rs 910 crore from 1182 crore qoq.

The collection efficiency of these customers remains comfortable with bulk of the reduction happening through upgrades and recoveries.

Microfinance

Loan book originated through BFIL stands at Rs 39267 crore, reflecting growth of 22% yoy and 8% qoq.

Active loan clients increased to 90 lakhs, rising 15% yoy from 78 lakh a year ago and 7% qoq from 84 lakh a quarter ago.

The share of non-MFI book improved to 13% as against 9% a year ago.

The bank clocked disbursement of Rs 12022 crore growing 24% yoy and 43% qoq driven by healthy new member additions of 9.1 lakh during the quarter.

Portfolio quality too improved with net slippage reducing to 182 crore from 311 crore qoq.

MFI standard book net collection efficiency for Q2 was at 99.1%. The 30-90 DPD book declined to 1.94% as against 2.36% last quarter ago.

Bharat Super Shop continued its scale up reaching loan book of Rs 4904 crore with 83% yoy and 16% qoq growth. The number of loan clients stood at 7 lakh end September 2023. The standard book net collection efficiency from this client base stood at 99.1%.

Global Diamond & Jewellery Business

The global economic challenges continue to impact the diamond demand. This reflects in the reducing working capital requirements for customers. The portfolio has consequently seen a degrowth of 10% qoq.

The asset quality continues to be pristine with no SMA1, SMA2 or restructured accounts.

The bank does not have any exposure to these troubled customers.

Corporate Bank:

The corporate loan book maintained healthy growth trajectory of 18% yoy and 3% qoq growth, led by small corporates growing 8% qoq and 50% yoy.

Within small corporates, focused strategy on Corporates with above Rs 500 crore turnover segment has been bearing results – growing 52% yoy.

Growth across large and mid-corporates was 2% qoq and 14% yoy in line with expectations.

The proportion of A and above rated customers has improved to 77% against 72% yoy with weighted average rating improving to 2.57 from 2.65 yoy.

The Gross Slippages in corporate book were at Rs 214 crore for the quarter. This included one account of Rs 169 crore from last quarter SMA slipping into NPA.

Overall, the bank continue to progress on the granularization of the corporate franchise through small businesses and diversification.

Overall the bank is comfortable with the asset quality trends in corporate.

Other Retail Assets

Consumer banking business continues to show robust momentum growing 31% yoy and 8% qoq.

MSME Book under business banking is at Rs 15364 crore which grew 4% qoq and 23% yoy.

The bank is scaling up home loan pilot with book crossing 1000 crore mark during the quarter to 1005 crore end September 2023.

On unsecured side, the Credit card growth was driven by new cards acquisitions & highest ever quarterly spends. Credit Card spends market share has improved to 4.7%.

The bank is watchful on the unsecured growth given the rapid industry growth and macro trends.

Financial performance

Net Interest Margin at 4.29% remains steady qoq while improving yoy from 4.24%.

The bank continues to believe the bank has enough levers to absorb any increase in cost of deposits within ambition of 4.2% to 4.3% net interest margins.

Core client fees excluding trading income too grew by 13% yoy. Share of Retail fees remains healthy at 74%.

The bank has added 3500 employees during the quarter and 7600 employees in last 6 months.

Asset quality and provisions

The provisions continued the downward with annualized provisions to loans easing to 123 bps from 175 bps yoy and 132 bps qoq.

The credit cost has now come down to PC-6 expected range.

The Net Security Receipts have further reduced to 39 bps from 44 bps in previous quarter. The bank made additional provisions of Rs 146 crore towards the SR book during the quarter.

The bank have maintained provision coverage ratio of 71%.

Total loan related provisions are at 2.3% of loans or 118% of the GNPAs.

SMA1 and SMA2 book was at 6 bps and 20 bps respectively.

Planning Cycle 6 strategy

The liability granularization continues apace rising towards target for retail deposit at 45% to 50% in PC-6. The initiative should see further support from the launch of digital offering as well as marketing campaigns.

The second half of the year is seasonally better for vehicle and microfinance businesses. This should help sustain the growth momentum in coming quarters as well.

Overall the bank remains comfortable on all the profitability metrics.