IndusInd Bank Q2 PAT tanks 40 per cent on higher provisions, bad loans
Private sector lender IndusInd Bank on Thursday reported a sharp 40 per cent year-on-year (y-o-y) and 39 per cent quarter-on-quarter (q-o-q) fall in its Q2FY25 consolidated net profit at ₹ 1,331 crore, largely on account of higher provisions due to bad loans from unsecured credit segment.
The bank’s gross and net non-performing asset (GNPA, NNPA) ratio rose to 2.11 per cent and 0.64 per cent in Q2FY25, respectively, from 2.02 and 0.60 per cent a quarter ago.Segment wise, two-wheeler loans had 8 per cent GNPA ratio, micro loans had 6.5 per cent GNPAs and credit card NPAs stood at 3.3 per cent. The bank is among the largest MFI lenders in the country with ₹32,723 crore of outstanding micro loans as on September 30.
As bad loans rose, provisions and contingencies funds rose 87 per cent y-o-y and 73 per cent q-o-q to ₹1,820 crore. The bank’s pre-provisioning operating profit stood at ₹3,600 crore, down 8 per cent y-o-y.
“The unsecured business over the last three years has grown at a very rapid pace. As a consequence of that, whether it is lower ticket size or higher ticket size, loans have grown at fast pace. I think there is a pause which is happening as everybody is seeing a slight uptick in delinquencies which are happening specifically on the credit card, and personal loan,” said Sumant Kathpalia, MD & CEO, IndusInd Bank.
On the micro loan front, the MD said NPAs may appear higher due to denominator effect, wherein disbursements are lower as the bank is being cautious in growing MFI book in certain pockets of Bihar, Jharkhand and Maharashtra due to over leveraging of customers.
“We have been very cautious on disbursement in these States as a prudent measures…the business (MFI) will normalise only if you see normalisation of disbursement cycle. Today, I think we are 60-65 per cent there, not 100 per cent,” he said, adding that with upcoming festivals, the disbursements may rise and micro loan delinquencies may flatten in Q3 or Q4.
Core business
IndusInd Bank’s overall deposits grew at a faster pace than credit in Q2, leading to slower core income growth and lower margin. Total deposits were up 15 per cent y-o-y to ₹4.12 lakh crore, whereas overall advances rose 13 per cent to ₹3.57 lakh crore. The bank’s net interest income (NII) grew 5 per cent y-o-y to ₹5,347 crore,while net interest margin stood at 4.08 per cent as against 4.29 per cent in corresponding period previous year.
IndusInd Bank expects NIM to rise to 4.2-4.3 per cent level in H2FY25 if the microfinance industry comes back from the woods, and disbursals rise.
The bank’s other income, which includes fees from third party services, treasury and forex income, was down 4 per cent y-o-y to ₹2,185 crore. Cost to income also rose to 52 per cent in Q2FY5 from 47 per cent in Q2FY24. The lender’s capital adequacy ratio was at 16.51 per cent as on September end, with tier-I ratio at 15.21 per cent.
| Parameter | Q2FY25 | Change (y-o-y, in per cent) |
|---|---|---|
| Advances | ₹3.57 lakh crore | 13 |
| Deposits | ₹4.12 lakh crore | 15 |
| Net interest income | ₹5,347 crore | 5 |
| Net NPA (in per cent) | 0.64 | 7 basis points |
| Net profit | ₹ 1,331 crore | -40 |