A healthy growth in fee income, along with a tight control on interest costs, helped IndusInd Bank post a 52 per cent rise in net profit for the first quarter ended June 30, 2011. Net profit grew to Rs 180 crore, from Rs 118 crore in the corresponding quarter last year.

“We have seen an increase in all components of fee income such as trade, forex, third party products and investment banking. The share of other income to total income has increased to 35 per cent from 30 per cent,'' Mr Romesh Sobti, Managing Director and CEO, IndusInd Bank, said.

Despite rising interest rates, the bank managed to protect its net interest margin by passing on the rise in cost of deposits. The bank also sharply increased its borrowings from sources other than deposits like overseas borrowing, refinance, and RBI's repo window, in order to keep credit costs under check.

“Although NIMs reduced as compared with the fourth quarter of last year, compared with the year-ago quarter, they have gone up. This year, the challenge is to preserve margins. Banks have to re-price their books and manage costs by passing on the cost to customers,'' Mr Sobti said.

IndusInd Bank's consumer finance book grew by 41 per cent and corporate book grew by 28 per cent.

“We are a working capital bank and there is still demand for working capital loans. This year we anticipate loan growth of 25-30 per cent. The only difference is that people don't want to borrow long as they don't want to lock into the high interest rates,” Mr Sobti said. Provisions were lower at Rs 45 crore (Rs 49 crore). “We had done additional provisions in the earlier quarter and our provision coverage is at 73 per cent. Now the quality of our loan book is stable and we expect provisions to be steady going ahead,'' Mr Sobti said. He added that the bank is not seeing any stress in any of the loan portfolios.

This fiscal the bank will raise about Rs 400-500 crore through subordinated debt. There is no plan to raise equity capital. It will open about 125 branches and hire about 1,500 people, Mr Sobti said.

“In the first quarter we have already hired about 900 people. We plan to open about 125 branches every year till we reach a network of 600-700 branches by March 2014. Our biggest challenge is to maintain credit quality and expand our branch network,'' he said.

Shares of IndusInd Bank closed at Rs 286.65, up 0.74 per cent, on the BSE, on Friday.

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