IndusInd Bank slumps after deposits shrink by 10-11%

IndusInd Bank slumped 14.66% to Rs 351.20 after the bank in a business update on Monday, informed that it has seen a withdrawal of 10-11% of its deposits, led by government related accounts.

The bank said that the withdrawal in the government related accounts is largely related to general private sector bank stance. This withdrawal will also result in lower CASA ratio, but it will reduce the bank's dependency on this category for deposits in future.

It further said that some deposits reduction in the wholesale category was attributable to stock price fall. The reduction in retail deposits is the least compared to the above two categories, the private lender said.

The bank said that currently deposits are more stable and flows recommenced and added that net interest margins (NIMs) are expected to remain stable.

The bank added that it has replaced it outflows by inflows through longer duration refinance/forex borrowings swapped to Indian rupee, bank certifications of deposit and term money borrowings, repo of excess Statutory Liquidity Ration/Non-SLR securities and through call money (both interbank borrower and lender as a balancing figure).

The bank said it did not dip into other lines of credit like the Marginal Standing Facility (MSF). Liquidity Cover Ratio (LCR) is maintained at a daily average of 112% in March in line with the bank's historical range.

The lender also said that the moratorium granted by the RBI should help its portfolio in various segments.

The bank expects its commercial vehicle segment (12% of loans) to bounce back rapidly from disruption once the situation normalises as it is fully linked to economy.

The bank expects the operation of its micro finance business (10% of loans) to bounce back as history has shown strong collections on resumption (98% for recent Kerala floods and 96% for demonetisation).

The bank's personal and credit card loans (5% of loans) are likely to see higher delinquencies. However, it senses normalcy soon after situation stabilises.

In business banking (6% of loans), less than 8% portfolio is in impacted sectors like retail, tour travel, etc.

For loan against property segment (5% of loans), the portfolio is granular, very well secured and distributed.

The bank expects NBFCs segment (3% of loans) to witness some elevation in delinquencies if disruption is for more than 3 months.

Going ahead, the management would focus more on balance sheet realignment rather than growth. The immediate priority is to consolidate and build resilience.

The management team would be largely intact, but some tweaks on structure and accountability is expected. Employees to be incentivised appropriately, but there could be a change in mix of fixed/variable besides malus/clawback provisions where applicable, the private lender said.

IndusInd Bank's standalone net profit jumped 32% to Rs 1,300.20 crore on a 25.5% surge in total income to Rs 9,073.93 crore in Q3 December 2019 over Q3 December 2018.

IndusInd Bank is engaged in banking and para-banking services. The bank is involved in accepting deposits, such as savings accounts, current accounts and fixed deposits, and banking solutions.

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