IndusInd Bank Reports 40% Drop in Q2 Profit Due to Higher Provisions; Deposits Grow 15% Year-on-Year

IndusInd Bank Reports 40% Drop in Q2 Profit Due to Higher Provisions; Deposits Grow 15% Year-on-Year

IndusInd Bank announced a 40% decline in its net profit for the second quarter of the current financial year, reaching Rs 1,325 crore, mainly impacted by an increase in provisions for bad loans. This performance missed analyst expectations, with Bloomberg projections estimating profits at Rs 2,214 crore.

The bank’s net interest income (NII), which reflects the difference between interest earned and paid, rose by 5% to Rs 5,347 crore from Rs 5,077 crore in the same period last year. However, the net interest margin (NIM) dropped to 4.08% from 4.29%, largely due to stress within the microfinance sector. Sumant Kathpalia, Managing Director and CEO of IndusInd Bank, noted that additional provisions were set aside as a precautionary measure. "If the microfinance sector stabilizes, we expect NIMs to return to 4.2-4.3% in the coming quarters," he added.

The bank's advances increased by 13% year-on-year to Rs 3.57 lakh crore, while unsecured retail loans and microfinance loans saw declines of 6% and 5% quarter-on-quarter, respectively, with microfinance loans now at Rs 32,723 crore.

In terms of loan quality, slippages—or the percentage of standard loans turning into non-performing assets—rose by 17% from the previous quarter, totaling Rs 1,798 crore.

Kathpalia stated that IndusInd Bank’s strategy has shifted to emphasize retail deposit mobilization, a focus on secured loans, and a reduction in unsecured loans, all while building a conservative provision buffer. The outcomes of this approach were evident in deposit growth, which rose by 15% year-on-year, outpacing loan growth at 13%. As of September 30, 2024, deposits stood at Rs 4.12 lakh crore, with retail deposits comprising Rs 1.81 lakh crore—up 16% year-on-year. Current and savings account (CASA) deposits accounted for 35.87% of total deposits.

The bank's provisions and contingencies surged by 73% quarter-on-quarter to Rs 1,820 crore, an 87% increase year-on-year. The gross non-performing asset (GNPA) ratio climbed 9 basis points to 2.11%, while the net NPA ratio rose 7 basis points to 0.64%.

The bank’s total capital adequacy ratio under Basel III guidelines stood at 16.51% as of September 30, 2024, down from 18.21% in the previous year. The provision coverage ratio was at 70% as of the same date.