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IndusInd Bank: IndusInd expects restructuring book to be in control: CEO


IndusInd Bank expects its total restructured book to be in “single digits” even as it stepped up provisions to deal with any Covid related uncertainties.

“We are still in the process for identifying accounts for restructuring and we expect it to be in the low single digits. We have got some requests for restructuring but they are not substantial,” CEO Sumant Kathpalia said in a conference call with reporters.

The bank’s total slippages at just 19 basis points of its loan book or Rs 400 crore were made up by the Rs 495 of recoveries and upgrades the bank had in the quarter ended September. One basis point is 0.01 percentage point.

Kathpalia said the bank’s guidance of credit costs at 92 basis points could change because of the restructuring allowed by the RBI.

The bank increased total provisions to Rs 4,606 crore up from Rs 2381 crore a year ago including covid related provisions of Rs 2,155 crore of which Rs 952 crore during the quarter.

Kathpalia said that the bank had stepped up provisions but will continously evaluate their provision position. Higher provisions improved the provision coverage ratio to 77% in September 2020 from 67% in June and 50% in September 2019.

Gross non-performing assets were little changed at 2.21% of advances as on September 2020 against 2.19% a year earlier. It would have been 2.32% if the Supreme Court stay in reporting fresh NPAs was not in place.

IndusInd Bank’s consolidated net profit halved year on year 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 2020 from Rs 1401 crore a year ago as loan growth was a tepid 2% as the bank shrunk its large corporate and micro finance book in an attempt to derisk its porfolio.

CEO Sumant Kathpalia the bank remains “cautiously optimistic” of growth prospects for the rest of the fiscal especially as demand for tractors, car loans, commercial vehicles, secured retail and micro finance loans is showing signs of revival.

He reiterated the bank’s stand on reports of a merger with Kotak Mahindra Bank calling it “speculative and malicious” while 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 shows that the economy is back to pre Covid levels. A good monsoon should also help 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 but did not give a guidance on loan growth.

A fall in fee income and the excess liquidity the bank maintained during the quarter also impacted profitability.

Fee income at Rs1,554 crore in September 2020 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 at 4.16% was up 4.10% a year ago but lower than the 4.28% reported in June.

“We had excess liquidity of 33,000 crore during quarter and were giving 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. Deposits grew 8% versus the quarter ended June.

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