IndusInd Bank conducted a conference call on 25 April 2024 to discuss its financial results for the quarter ended March 2024. Sumant Kathpalia, MD&CEO of the bank addressed the call:

Highlights:

The bank has continued retail deposit momentum with retail deposits growing at 18% yoy.

Loan growth was at 18% yoy driven by 23% growth in retail loans. Vehicle business grew at 17% yoy, microfinance at 22% yoy and other retail at 32% yoy.

Within corporate, small corporates grew by 33% yoy, mid corporate grew by 8% yoy and Large corporate grew by 13% yoy.

The bank continues to scale-up new initiatives with Affluent business grew by 24% yoy, NRI deposits grew by 33% yoy.

The merchant loan book originated via BFIL now crossed Rs 5,500 crore mark, while home loan book now stands at Rs 1792 crore.

The bank saw sequential improvement in asset quality with slippages reducing across all the business units.

The credit cost was at 111 bps in Q4FY24 and the bank closed full year credit cost of 113 bps within communicated expectations.

The profitability metrics have remained healthy and stable over the course of last year.

The key ratios are healthy with NIM at 4.26%, ROA at 1.90% and ROE at 15.23% in Q4FY2024.

GNPA and NNPA were stable qoq.

The balance sheet of the bank has now crossed Rs 5 lakh crore mark.

The bank continues to invest across distribution, digital, human capital & marketing initiatives.

The bank has added 256 branches during the quarter. The bank has also added around 2,100 employees during the quarter and more than 11,000 employees in FY24, across group distribution. As a result cost to income has been on the higher side for last few quarters.

The bank has built a well diversified loan book across consumer and corporate products. The loan mix has moved in favor of retail during the year at 56%. Consumer businesses grew at 23% yoy. Corporate book grew at 13% yoy.

Vehicle Finance

Vehicle finance loan book grew 17% yoy with full year disbursements crossing Rs 50,000 crore for the first time in history.

During the quarter, the bank has completed migration of around 5 million vehicle customers to finacle from the legacy system.

Asset quality improved sequentially with gross slippages reducing to 0.57% from 0.73% qoq in vehicle finance.

The restructured book in vehicle finance reduced to Rs 547 crore from Rs 705 crore qoq with majority of the reduction due to upgrades and recoveries.

Micro Finance

The bank had another strong quarter for microfinance business with loan book rising 10% qoq and 23% yoy to Rs 44750 crore.

Both the microfinance as well as merchant acquiring segments grew handsomely at 22% and 38% yoy respectively.

The microfinance loan disbursements were at Rs 13800 crore growing 19% yoy.

Microfinance gross slippages reduced to Rs 335 crore in Q4 from Rs 363crore qoq.

Other Retail Assets

Other retail assets continued robust momentum with 9% qoq and 32% yoy growth. MSME book under business banking maintained strong traction with 21% yoy growth.

Home loan book now stands at Rs 1,792 crore growing 30% qoq.

The bank has cautiously moderated sequential growth in unsecured products like credit cards and personal loans at 5% against 9% qoq growth last quarter.

Overall, scaling other retail assets is one of the key focus areas for the Bank and the bank aim to grow other retail assets at faster pace while improving the balance towards secured mix.

Corporate Portfolio

The corporate loan book grew 13% yoy. Within corporate, small corporates grew by 33% yoy, mid corporates excluding gems and jewellery grew by 19% and Large Corporates grew 13% yoy.

Gems and jewellery book continues to see working capital reduction due to weak global demand. The asset quality of gems & jewellery book remains pristine with no NPA, SMA1 & SMA2.

Corporate fees remain granular and diversified as the bank removed reliance on chunky sources like Investment Banking/ Structured finance.

The proportion of A and above rated customers is now 77% compared to 73% yoy. The weighted average rating too improved to 2.51 from 2.65 yoy.

Overall, the bank are growing corporate book in calibrated manner with focus on granularity and areas where the bank has right to win rather than chasing headline growth numbers.

Liabilities

The retail deposit momentum continued during the year. Cost of deposit increased by modest 4 bps qoq driven by the mix in favour of term deposits and some repricing.

The bank has added 256 branches during the quarter and 378 branches in FY24. Branch count now stands 2,984.

Stable Margins

Overall margins continue to remain stable around expected range. Loan mix moving in favour of retail loans provides the ability to absorb deposit repricing.

Healthy Assets Quality

GNPA and NNPA were steady qoq. Restructured book continues to run down at 0.40% compared to 0.48% qoq.

Net SR book reduced to 0.34% of loan book against 0.37% qoq. The bank has made Rs 91 crore provisions for Security Receipt book this quarter.

SMA1+2 book was at 0.24% of loan book.

During the quarter, the bank also saw full repayment of the funded exposure towards a stressed telco of Rs 990 crore. The Bank had made a prudential contingent provision towards this account. The bank has retained large part of this provision in the contingent buffers.

Planning Cycle 6 Progress

The bank completed first year of Planning Cycle – 6 in FY24 and outcomes have been largely in line with ambitions. The bank made steady progress across key themes of PC-6:

1. Continuing Retailisation Journey: The share of retail deposits has increased to 44% compared to 31% in March 2020. The bank has lowered dependency on bulk deposits and borrowings.

2. Diversifying Domains: Vehicle portfolio is now diversified across product categories and the Bank is well positioned for sustainable growth across different product cycles. The bank continue to progress on the journey of transitioning BFILs rural business from microfinance to micro banking. The share of non-microfinance loans is now close to 13% of overall loan sourced via BFIL and the bank aspire to take it to 30%-35% in next 2-3 years. The bank has close to 18mn SA & RD account opened via BFIL with deposits of more than Rs 2900 crore.

3. Scaling Sub-scale Businesses: The bank is scaling new and existing initiatives across assets and liabilities. This is one of the key focus area for PC-6. The bank continues to scale existing liabilities initiatives of Affluent and NRI Banking. The bank will further expand affluent and NRI offering with launch of Private Banking focused on HNI/ UHNI customers.

4. Accelerating Digital 2.0: The bank has laid a strong digital foundation with progress on ‘Digital 2.0’ strategy and created a strong stack of digital products & capabilities.

5. Imbibing ESG into with Business: The Bank has deepened its impact on the society through responsible lending, mitigating climate change, and promoting social behavioural changes.

Focus areas for FY25

Steadfast focus on retailisation of deposits navigating challenging environment. Calibrating loan growth in sync with deposit growth, prioritizing diversification and granularity.

Maintaining healthy profitability in top quartile of industry.

The bank aim to grow ahead of industry. The bank is committed to PC-6 growth rates whilst being watchful of operating environment quarter on quarter.

The bank remains comfortable with margins with some potential upside when interest rate cycle turns.

The bank continues to invest in digital and other liability initiatives. The cost to income thus should be range bound in near term and improve as the operating leverage plays out in a few quarters.

The asset quality is now in steady state and any improvement would be used to build contingent buffers.