IndusInd Bank Ltd on Monday reported a 26% increase in its June quarter net profit on higher interest on loans, fees, and commissions.
Net profit in the fiscal first quarter rose to Rs.6 Rs.525.04 crore a year ago. Ten analysts polled by Bloomberg had forecast a net profit of Rs.651.30 crore.
Net interest income (NII), or the core income a bank earns by giving loans, increased 38.32% to Rs.1,356.42 crore from Rs.980.66 crore last year. Non-interest income, including fees and commissions, rose to Rs.972.97 crore from Rs.761.61 crore, a rise of 27.75%.
Total advances as on 30 June were at Rs 93,678 crore, up 30% from the same period last year. Of this, corporate sector advances were at Rs 55,087 crore, up 30% from last year, while retail advances rose 29% from a year ago to Rs 38,591 crore.
Total deposits at the end of the first quarter was reported at Rs 1,01,768 crore, up 31% from last year. The share of current account savings account (CASA) to total deposits dropped slightly to 34.4% as on 30 June, from 34.7% in the same period a year ago.
“On an absolute basis, CASA has grown, but it dropped as a share of total deposits because of a 31% growth in them. Within deposits, the growth has happened because we have been able to reprice our bulk deposits better and those are growing,” said Romesh Sobti, managing director and chief executive officer, IndusInd Bank.
The bank’s net interest margin (NIM) was reported at 3.97% during the quarter, higher than 3.94% reported in January-March period. The increase in margins was owing to the reduced borrowing cost and a higher portion of the bank’s loan book being in the fixed rate system, Sobti said.
“About 72% of the bank’s loan book is in the fixed rate system and in that, about 31% comes from vehicle finance, which has helped the margins,” he added.
Gross non-performing assets (NPAs) rose 10.8% to Rs.860.64 crore at the end of the June quarter from Rs.776.82 crore in the March quarter. On a year-on-year basis, gross NPAs were 51% higher than the Rs.570.12 crore reported in the same quarter last year.
Provisions and contingencies jumped 7.87% to Rs.230.47 crore in the quarter from Rs.213.66 crore in the preceding quarter. It marked a jump of 86.87% from Rs.123.33 crore in the same period last year.
The private sector lender had to make additional standard asset provision worth Rs 35 crore owing to its exposure to Food Corporation of India (FCI).
“We have an exposure of Rs 240 crore in the account and are following the orders from the lead lender. We had time during the January-March and April-June quarters to make this provision, but we chose to do it only now,” Sobti said.
As a percentage of total loans, gross NPAs were steady and stood at 0.91% at the end of the June quarter, compared with 0.87% in the previous quarter and 0.79% in the year-ago quarter. Net NPAs made up 0.38% of the loan book in the June quarter compared with 0.36% in the previous quarter and 0.31% in the same quarter last year.
In December, the Reserve Bank of India (RBI) conducted an asset quality review (AQR) across the banking sector, following which banks were asked to recognize visibly stressed assets as NPAs.
RBI also asked banks to make adequate provisions for these stressed assets over the third and fourth quarters of the fiscal year ended 31 March 2016. While most of the pain from the AQR was felt in the third and fourth quarters of the last fiscal, banks are expected to proactively provide for stressed assets in the current fiscal year as well, with the intention of cleaning up their balance sheets by March 2017.
“The numbers were more or less within the expectations of the market. Considering that the growth is well spread out on the bank’s book, it gives comfort to investors. We continue to have a ‘buy’ rating on the stock,” said Ravi Shenoy, vice president-midcaps research, Motilal Oswal Securities.
Shares of IndusInd Bank declined 0.25% to Rs.1,123.95 apiece on BSE, while the benchmark Sensex rose 1.84% to 27,626.69 points.
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