IndusInd Bank Q2 Results: A Net Loss of Rs 436 Crore

IndusInd Bank Ltd. reported a net loss of Rs 436 crore on a consolidated basis for the September quarter, compared with a profit of Rs 604 crore in the previous quarter. This significant decline in profitability can be attributed to a 50% rise in provisions, which increased to Rs 2,631 crore from Rs 1,760 crore in the previous quarter.

Net Interest Income Falls 5%

The bank’s net interest income (NII) fell 5% to Rs 4,409 crore from Rs 4,640 crore in the previous quarter. This decline in NII can be attributed to the higher provisions made by the bank, particularly in its microfinance portfolio.

Asset Quality Shows Slight Improvement

Despite the decline in profitability, the bank’s asset quality showed a slight improvement. The ratio of gross non-performing assets (NPAs) fell to 3.60% from 3.64% in the previous quarter, while the net NPA ratio declined to 1.04% from 1.12%.

Provisions Rise 50%

The bank’s provisions rose 50% to Rs 2,631 crore from Rs 1,760 crore in the previous quarter. This significant increase in provisions was primarily due to the higher provisions made in the microfinance portfolio.

Return on Assets and Equity Turns Negative

The bank’s return on assets (RoA) turned negative, falling to -0.33% from 0.45% in the previous quarter. The return on equity (RoE) also turned negative, falling to -3.19% from 6.40% in the previous quarter.

Advances and Deposits Decline

The bank’s advances declined 2% to Rs 3.25 lakh crore from Rs 3.57 lakh crore in the previous quarter. Total deposits also declined 2% to Rs 3.89 lakh crore from Rs 4.03 lakh crore in the previous quarter.

Net Interest Margin Falls 14 Basis Points

The bank’s net interest margin (NIM) fell 14 basis points to 3.34% from 3.48% in the previous quarter.

CASA Ratio Remains Flat

The bank’s current account and savings account (CASA) ratio remained flat at 31%.

Microfinance Provisions Rise Rs 872 Crore

The bank’s microfinance provisions rose Rs 872 crore on a sequential basis, and the bank wrote off bad loans worth Rs 1,940 crore in the quarter under review.

Management’s Commentary

Managing director and chief operating officer Rajiv Anand stated that the bank’s asset quality trends have been stable in all core businesses except in microfinance, where the industry is facing cyclical pressures. He added that the bank has tightened underwriting and controls on microfinance and anticipates growth to normalize in up to six months.

Chief financial officer Viral Damania explained that the NII fell due to the provisions in the lender’s microfinance portfolio. He added that accelerated write-offs in the quarter under review led to higher provisions, which in turn led to the company reporting a net loss for the quarter.

Impact on Investors

The bank’s Q2 results are likely to have a negative impact on investor sentiment, particularly given the significant decline in profitability. However, the bank’s management has taken steps to address the issues in its microfinance portfolio, and investors will be closely watching the bank’s performance in the coming quarters.

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