IndusInd Bank CEO confident of Q4 net profit despite derivatives hit

Kathpalia assures strong capital adequacy as promoters reaffirm trust in bank

Indusind Bank will report net profit for the current quarter (Jan-March) as well as for the full financial year, despite the hit on the bottomline due to discrepancies discovered in the derivative portfolio, Sumant Kathpalia, MD & CEO, Indusind Bank said in an interview to a news channel on Tuesday.

 

On Friday, the bank informed the exchanges that the Reserve Bank of India (RBI) granted only one-year extension to Kathpalia, even if the board recommended a three-year reappointment.

 

He assured the banks’ capital adequacy will remain above 15 per cent, helped by the relief the RBI has provided to banks on relaxation in risk weights on microfinance exposures.

 

The bank on Monday reported that an internal review of processes related to its derivative portfolio revealed certain discrepancies, which will adversely impact its net worth by 2.35 per cent. Analysts estimate the hit on profit to be between ₹1,500 crore to ₹2000 crore.

 

The bank has appointed an external agency to independently review and validate the internal findings. A final report of the external agency is awaited and the basis which the bank will appropriately consider any resultant impact in its financial statements.

 

The bank had stated that its profitability and capital adequacy remains healthy to absorb this one-time impact.

 

Kathpalia, addressing an analyst call on Monday, said that this incident of finding discrepancies could have had a bearing on the RBI deciding not to give him a three-year extension.

 

“I got two years for my second term, and one year for my third term. It was more a conjecture on my part and we have to respect RBI’s views. In two consecutive terms, you are either getting a two-year or one-year term and not the full term…”, Kathpalia said in the interview to CNBC TV18.

 

“The board will look at succession planning, where they will look at external and internal candidates to decide what is the way ahead”, he said.

 

On being asked if he will be considered by the bank’s board as one of the candidates to lead the bank again, Kathpalia said, “That is very difficult for me to say. I have a one-year tenure, and I have a lot of work to do. The bank has to get back on its feet and show in Q1FY26 where it stands compared to the peers. We have to get back the profitability. We have to get back the trust of the investors as well as the depositors”.

 

Separately, Ashok Hinduja, Chairman, IndusInd International Holdings (IIHL), in an interview to the same TV channel said, “Our trust and confidence in the board and management is very strong”.

 

“The financials are very strong. The operating profit for nine months is over ₹11,000 crore. The hit of ₹1,500-₹1,600 crore is not much. They will be able to take this hit,” Hinduja said, adding that his suggestion to the shareholders is that they should not panic as these are routine problems.

 

He added that the promoters are waiting for approval from the RBI to increase their stake in the bank from 15 percent to 26 percent. “As soon as we receive approval from the RBI, we will immediately inject capital into the bank as and when required,” he said.

 

Hinduja also stated that there has been no margin call on the shares pledged IIHL of Indusind Bank.