IndusInd Bank’s net profit grew 29 per cent to ₹751 crore in the third quarter ended December 31, on the back of higher net interest income and other income. This was despite the banking sector being pre-occupied with demonetisation woes.
The bank had posted a net profit of ₹581 crore in the corresponding year-ago period.
Commenting on the robust financial performance, Romesh Sobti, Managing Director and CEO, said the big driving engine for growth was net interest income (NII), which grew 35 per cent to ₹1,578.42 crore, from ₹1,173.42 crore in the same period last year. “This is not just a quarterly event that this quarter we grew our NII by 35 per cent, it has been the same for the last nine months.
The bank is slightly better positioned in a falling interest rate scenario as we have 70 per cent of our loan book at fixed rates. As rates fall on one side and cost of deposits go down, the yield doesn’t fall to the same extent because we have a large component of a fixed rate book,” Sobti said.
As a result, net interest margin improved nine basis points year-on-year to 4 per cent. The bank is on course to achieve a network of 1,200 branches by FY17. Other income rose 21 per cent to ₹1,016.80 crore, from ₹839 crore in the same period last year. Deposits grew 38 per cent y-o-y to over ₹1.19 lakh crore with low-cost deposits (current account, savings account or CASA) growing 46 per cent and savings accounts growing 56 per cent. Hence, the ratio of CASA to total deposits grew significantly y-o-y by 206 basis points to 37.04 per cent.
DemonetisationOn the surge in costs due to higher outgo on cash logistics, Sobti said the cost of moving cash, and the cost of re-calibrating ATMs, are immaterial, as the benefits of demonetisation far outweigh the costs.
“There is a cost as cash had to be moved around quickly and air-freighted in some cases. I think the real cost is how quickly you moved your cash from the branches/vaults to the currency chests. As soon as you did that, technically that cash in the currency chest comes as cash reserve ratio. Our four currency chests could move out cash very quickly from vaults. This cost will vary from bank to bank,” Sobti said.