IndusInd Bank conducted
conference call on 18 January 2024 to discuss its financial results for the
quarter ended December 2023. Sumant Kathpalia, MD&CEO of the bank addressed
the call:
Highlights:
The bank has exhibited one
of the best retail deposit mobilisation in Q3FY2024 with moderate increase in
cost of deposits.
The loan growth was broad
based across retail segments. The key profitability metrics like NIMs, PPOP
margin, RoA etc were healthy.
The bank saw slippages on
the higher side than expected and its working towards normalisation in this
quarter.
The retail loan growth was
strong at 24% yoy which drove the overall loan growth of 20% for the Bank.
Retail saw healthy momentum
across vehicle, microfinance & consumer segments.
The bank is selective in corporate
loan growth at 15% focusing on mid and small corporates.
The bank saw one of the
sharpest sequential improvement in the share of Retail Deposits as per LCR of
around 1% in one quarter.
Retail deposits grew 5% qoq
despite the challenging liquidity environment. The bank is now touching the
PC-6 ambition of 45%-50% retail as per LCR with still couple of years to go.
The increase in Cost of
Deposits was also moderate at 9bps qoq.
Gross NPA remained steady at
1.92% and net NPA at 0.57% end December 2023.
Gross slippages were at Rs 1765
crore, as the slippages in vehicle book were impacted by adverse weather
conditions towards the end of last quarter and since then have already started
showing improvement.
The restructured book
continues to run down to 0.48% compared to 0.54% a quarter ago.
Net Interest Margin remained
stable at 4.29% sequentially.
Other income grew by 15% yoy
driven by granular retail businesses.
The bank continues to invest
in human capital, physical and digital infrastructure as well as marketing
initiatives
Capital Adequacy Ratio
remains healthy with CET1 of 16.07% and overall CRAR at 17.86%.
Vehicle Finance:
Vehicle finance business
continued robust growth momentum with highest ever disbursements in history of
Rs 13700 crore growing at 7% qoq. Vehicle loan growth remained healthy at 20%
yoy and 5% qoq with demand picking up on the back on improving rural sentiments
& festive season.
The bank has doubled auto
loan book in last 2 years with market share now close to 4%.
The gross slippages in vehicle
finance were at 0.73% vs 0.93% yoy and 0.64% qoq.
The restructured book in
vehicle finance reduced to Rs 705 crore from Rs 910 crore qoq with majority of
the reduction due to upgrades and recoveries.
Bharat Financial Inclusion
BFIL distribution is now
running at its potential capacity with outstanding loan book originated of Rs 40544
crore growing 24% yoy. The growth was robust in both the microfinance as well
as merchant acquiring segments at 20% and 55% yoy respectively.
Active loan clients stand at
9.4 million reflecting a growth of 17% yoy and 4% qoq.
Microfinance
Microfinance business
continued momentum with yoy growth improving to 20% from 16% over last quarter.
Average loan outstanding per
customer reduced by 1% qoq as the bank were cautious with elections in a few
large states last quarter.
Net slippages improved to
0.55% vs 1.24% yoy and 0.57% qoq.
MFI standard book net
collection efficiency for Q3 was at 98.6% and early delinquency buckets are
better than the industry.
Merchant loan book stood at
Rs 4783 crore with 55% yoy growth. The standard book net collection efficiency
from this client base stood at 99.1%.
The kirana shop model has
around 61000 Active Bharat Money Stores providing banking at the doorstep in
remote areas.
The bank is well placed to
participate in the large rural opportunity with deep distribution network while
transitioning from micro finance to micro banking.
Global Diamond &
Jewellery Business
The business continued to
maintain its global leadership position. The growth however has been an issue
for several quarters due to global macro challenges. The portfolio has degrown
by 8% qoq and now contributes 3% of overall loan book.
The asset quality
nevertheless remains healthy with no SMA1, SMA2 or restructured accounts.
Corporate Bank:
The bank continues to grow
corporate book in calibrated manner with focus on areas of competitive
advantage rather than chasing headline growth numbers.
The overall corporate growth
of 15% yoy continues to be led by mid and small corporates growing at 17% yoy
and 3% qoq.
Growth in large corporates
was 2% qoq and 14% yoy in line with expectations.
The proportion of A and
above rated customers has improved to 77% vs 74% yoy.
The Net Slippages in
corporate book were at Rs 155 crore vs Rs 158 crore qoq. The slippage was
mainly due to one stressed account of Rs 140 crore.
The bank remain comfortable
with the overall asset quality trends in corporate segment considering the
improvement made in risk profile & granularity of portfolio.
Other Retail Assets
Share of unsecured loans
remains around 5%-5.5% and the bank aim to maintain it rangebound around
current levels.
Credit card growth was
driven by new cards acquisitions & strong spends.
Overall, the bank is focused
on growing consumer assets while improving the balance towards secured mix with
scale-up of home loans.
Liabilities
The bank remains on track
and committed to add around 1000 branches during this 3 year period. The bank
has also opened 97 branches in Q3 vs 25 branches in H1FY24.
Share of borrowings in total
liabilities was at 8%. The borrowings continue to be oriented towards long term
sources of funds.
The bank continue to believe
in phygital & segmental strategy and with constant investment in
traditional, digital and new initiatives
The bank remains comfortable
of achieving deposit growth ambitions.
Financial performance
Net Interest Margin was stable
at 4.29% sequentially while improving by 2bps vs 4.27% yoy, supported by
moderate 9bps increase in Cost of Deposits against 15 bps jump in yield on
advances.
The bank employee base grew
by 5% qoq.
The Net Security Receipts
have further reduced to 37 bps from 39 bps in previous quarter. The bank made
additional provisions of Rs 165 crore towards the SR book during the quarter.
The bank used contingent
provisions during the quarter as the bank expect reduction in stressed book
including that of a telco exposure.
SMA1 and SMA2 book
collectively is now only 19 bps.
Total loan related
provisions are at 2.2% of loans or 114% of the GNPAs.
CRAR including profits
remains healthy at 17.86%.
The bank is in sight of PC6
target of retailisation and aim towards achieving upper end of the 45-50% retail
deposit ambition over next couple of years.
The Net Interest Margins
have been stable throughout the challenging times and the bank expects support
once the interest rate cycle turns.
The RoA and RoE profile thus has potential for improvement as
the bank see benefit from NIMs, Cost to Income as well as Credit Costs coming
through over the next few quarters.
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