IndusInd Bank posted a 57 per cent YoY jump in profit after tax for Q2FY23 at ₹1,805 crore, and 11 per cent growth sequentially. The profitability was largely led by strong loan growth and improvement in the bank’s asset quality.
The private sector lender’s advances rose 18 per cent YoY and 5 per cent QoQ to ₹2.6 lakh crore as of September 30.
“The loan growth was broad-based across consumer and corporate portfolios. Our operating profit margins continue to be amongst the best in the industry,” said MD and CEO Sumant Kathpalia, adding that the bank continues to invest in its physical and digital distribution to maintain the growth trajectory.
Strong loan growth
In the post earnings call, Kathpalia said he expects loan growth for FY23 to sustain at 18-20 per cent on a CAGR basis, with strong growth in microfinance and vehicle already visible in October and seen continuing in H2FY23.
He added that the bank’s recently launched mortgage vertical is also seeing good traction, and the bank aims to grow the book to ₹1,000 crore by the end of FY23, and to ₹10,000-12,000 crore over the next two years.
Yield on assets improved to 8.7 per cent in Q1FY23 from 8.4 per cent a year ago, which Kathpalia attributed to upward repricing of corporate and SME loans by around 40 bps.
Net interest income (NII) for the quarter grew 18 per cent YoY and 4 per cent QoQ to ₹4,302 crore. Net Interest Margin (NIM) stood at 4.2 per cent, flat from a quarter ago but better than 4.07 per cent in the year ago period.
Asset quality improves
Improvement in the lender’s asset quality was led by a reduction in slippages, which fell to ₹1,572 crore in Q2FY23 from ₹2,250 crore in the previous quarter. The bank also wrote-off loans worth ₹1,168 crore and saw loan upgrades of ₹229 crore.
Recoveries for the quarter were at ₹541 crore, which included sale of loans worth ₹190 crore to asset reconstruction companies. Kathpalia said these were vehicle loans which the bank has classified as NPA two quarter back.
Gross NPA ratio of the bank improved to 2.1 per cent from 2.4 per cent a quarter ago, and the net NPA ratio at 0.6 per cent was also sequentially better than 0.7 per cent.
Other metrics
Other income at ₹2,011 crore was 9 per cent higher on year and 4 per cent on quarter, which Kathpalia said was also aided by a rise in loan processing fees due to strong loan disbursements.
Deposits were up 15 per cent YoY to ₹3.2 lakh crore as of September 30, with CASA deposits at ₹1.3 lakh crore comprising 42 per cent of total deposits. Without specifying expected deposit growth, Kathpalia said that deposit accretion for the bank in FY23 is expected to be 55-75 bps higher than the industry.
IndusInd Bank’s capital adequacy ratio was at 18 per cent as of September 30, of which tier-1 capital was 16 per cent. The capital burn rate for the bank is about 9 bps per quarter, Kathpalia said that the capital level is sufficient to sustain loan growth over the next 3-4 quarters.