Mumbai: IndusInd Bank’s consolidated net profit in the fiscal second quarter halved, as loan growth slowed and the bank stepped up provisions to deal with uncertainties arising out of the Covid-19 pandemic.
Net profit fell to Rs 663 crore in the quarter ended September 30, from Rs 1,401 crore a year ago as loans grew by a tepid 2% after the bank shrunk its large corporate and microfinance book in an attempt to de-risk its portfolio.
The bank remains “cautiously optimistic” of growth prospects for the rest of the fiscal year, especially as demand for tractors, car loans, commercial vehicles, secured retail and micro finance loans is showing signs of revival, said chief executive Sumant Kathpalia.
He also dismissed reports of a merger with Kotak Mahindra Bank, calling it “speculative and malicious”, adding that the bank management has the full support of promoter Hinduja family.
“Our collection efficiency was at 94.7% in September and likely to inch up further by December. All high-frequency data show that the economy is back to pre-Covid-19 levels. A good monsoon should also help in reviving consumption demand. Already, demand for tractors is growing at 33% and we are also seeing good demand for vehicle loans and secured retail,” Kathpalia said. He, however, did not give a guidance on loan growth.
The bank increased total provisions to Rs 4,606 crore, from Rs 2,381 crore a year ago, including Covid-19 related provisions of Rs 2,155 crore, of which Rs 952 crore was during the quarter.
A fall in fee income and the excess liquidity the bank maintained during the quarter also impacted profits. Fee income at Rs 1,554 crore in September was down from Rs 1,727 crore a year ago.
Net interest margin, or the difference between the yield earned on advances and that paid on deposits, stood at 4.16%, from 4.10% a year ago, but lower than the 4.28% reported in June.
“We had excess liquidity of Rs 33,000 crore during quarter and were giving Rs 20,000 crore through reverse repo. We chose to be conservative during the quarter and that impacted our margins. We will cut our retail deposit rates to align it to the market rates in this quarter,” Kathpalia said.
The bank went on an aggressive deposit garnering spree in the last six months after it lost a chunk of deposits in the quarter ended March 31.
Deposits grew 8% versus the quarter ended June 30.
Gross non-performing assets were little changed at 2.21% of advances as on September 30, against 2.19% a year earlier. It would have been 2.32% if the Supreme Court’s stay on reporting fresh NPAs had not been in place.
Kathpalia said the bank had stepped up provisions but will continuously evaluate its position regarding provisioning.
Credit: Stocks-Markets-Economic Times