In the September quarter (Q2FY21), the overall asset quality performance of IndusInd Bank was encouraging as gross non-performing assets (NPA) and net NPA ratio declined by 32 bps and 34 bps to 2.21 per cent and 0.52 per cent, respectively. Much of it may be attributed to the bank’s recent practice of recognising the asset quality pain upfront. Provisioning cost rose by 166 per cent year-on-year (YoY) to Rs 1,964 crore in Q2.
Net interest income or NII grew by 13 per cent year-on-year (down one per cent sequentially) and net profit fell by a whopping 53 per cent over last year.
“Post balance sheet realignment, the management is geared to pedal growth ahead with a focus on certain segments. Thus, we expect business momentum to pick from here on with operational parameters expected to show improvement. Improving collection efficiency and ample provision buffer is expected to arrest volatility in earnings but return ratios are seen improving gradually to 9.3 per cent in FY22E. Further, the quantum of advances to be restructured remains key monitorable. Therefore, until clarity emerges on asset quality front, we maintain our HOLD rating,” ICICI Securities said in result update.
“The credit growth remained subdued, but deposits have bounced back strongly after a scare in Q4. After dragging its feet for long, IndusInd Bank has made additional Covid-19-related floating provisions of Rs 950 crore, with the cumulative provisioning buffer now at a reasonable level of Rs 2,150 crore (1.1 per cent of loans), still lower than larger peers like ICICI/Axis. Management’s focus on building a granular retail portfolio is long-term positive but needs to manage asset quality, given elevated risk environment amid Covid-19-led disruption,” analysts at Emkay Global Financial Services said in result update.
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