IndusInd Bank, a key player in the commercial vehicle financing space, reported a healthy 29 per cent growth in profit in the December quarter. This was backed by a strong growth of 22 per cent in its loan book, essentially driven by the corporate segment. Retail lending, of which more than a third is to the commercial vehicle space, continues to lag growth in the corporate segment. Nonetheless, considering that the loan growth in the banking system for the corresponding period (as of December) was a subdued 10 per cent, IndusInd Bank has put up a good show. Strong return on equity of 18 per cent, a healthy capital ratio, and good asset quality are other positives.
Shift in loan mix
After having a good run until 2012-13, IndusInd’s retail loan growth slowed down in 2013-14, a fallout of the sluggish growth in the auto sector. The commercial vehicle segment, which now constitutes about 37 per cent of the retail loan book, has been affected by the sharp decline in CV volumes over the last two years. During the September quarter too, loan growth in this segment was flat.
The overall growth in loans was led by the corporate segment, which grew a robust 32 per cent over the last year. This has led to a shift in the loan-mix in favour of the corporate segment, which now accounts for about 58 per cent of total loans, up from 53 per cent during the same period last year.
While the yields on corporate loans are around 4-5 percentage points lower than that in the retail segment, the bank was able to improve its net interest margin (marginally) over the last year. This was thanks to the lower cost of funds.
While the bank’s total deposits grew at a healthy 23 per cent, its low-cost current account and savings account (CASA) deposits grew at a strong 31 per cent, backed by the bank’s growing retail presence. IndusInd Bank’s CASA ratio is now a healthy 34 per cent, two percentage points up from last year. Over the last three years, IndusInd has more than doubled its branch count. The bank plans to again double its branch network in the next three years.
Comfortable loan quality
Notwithstanding the robust growth in loan book, IndusInd has been able to maintain a stable asset quality during the December quarter. While the bank has seen some stress in the CV and construction equipment segment in the last one year, it has been able to contain overall slippages. The total gross non-performing assets (GNPA) stood at 1.05 per cent of loans, declining both on a sequential and yearly basis. As of December last year, GNPA stood at 1.18 per cent of loans. Restructured assets as a proportion of loans are at a comfortable 0.55 per cent.