IndusInd’s provisions spike, asset quality worsens in Q3; key takeaways

Private lender IndusInd Bank on Tuesday posted 32 per cent year-on-year rise in profit at Rs 1,300 crore for the quarter ended December 31, thanks to a healthy growth in retail and treasury revenue.

However, spike in provisions and worsening asset quality remains main concerns.

The shares of the lender plunged over 4 per cent after earnings announcement.

Romesh Sobti, Managing Director & CEO of Induslnd Bank said: "During Q3FY20, the bank witnessed a healthy growth in its topline as well as in operating profit. We reached a milestone as the balance sheet footage crossed Rs 3 lakh crore and advances crossed the Rs 2 lakh crore mark. PCR increased to 53 per cent to strengthen the balance sheet. We look forward to moving into the subsequent quarters with renewed momentum."

Here are the key takeaways from the bank’s Q3 earnings:

Provisions spike
Provisions for bad loans jumped as IndusInd Bank kept aside Rs 1,043.45 crore in the December quarter this fiscal compared with Rs 606.68 in the same quarter a year ago. This translates into a jump of 72 per cent.

Employee costs jump
Employee costs jumped 22 per cent to Rs 550 crore from Rs 452 crore. This can be explained by a significant number of branch additions by the lender. The bank operates via 1,851 branches now against 1,558 branches as on December 31, 2018.

Asset quality drops
Asset quality of the bank worsened year-on-year as gross non-performing assets (NPA) more than doubled to Rs 4,578 crore from Rs 1,968.15. In percentage terms it went up to 2.18 per cent from 1.13 per cent a year ago. Net NPA edged higher to 1.05 per cent to 0.59 per cent.

Retail revenue grows 32 per cent
Revenue from retail business rose 31.6 per cent year-on-year to Rs 5,026 crore from Rs 3,819 crore. Treasury operations also saw a strong growth of 25 per cent to Rs 1,460 crore while revenue from corporate banking lagged, growing at just 9.3 per cent to Rs 2,589 crore.

NII rises 34 per cent
Net Interest Income (Nll) for the quarter was at Rs 3,074 crore against Rs 2,288 crore in the corresponding quarter last year, registering a growth of 34 per cent. Non-interest income for the quarter was at Rs 1,790 crore compared with Rs1,469 crore, a growth of 22 per cent.

Loans portfolio grows 20 per cent
Total advances as of December 31, was Rs 2,07,414 crore compared with Rs 1,73,169 crore on December 31, 2018, recording a growth of 20 per cent.

Total deposits as on December 31, was at Rs 2,16,713 crore against Rs 1,75,701 crore, up by 23 per cent. Total business of the bank stood at Rs 4,24,127 crore.