Indusind Bank Q2 net profit down 40 pc on asset quality woes

     Mumbai, Oct 24 (PTI) Indusind Bank on Thursday reported a 40 per cent decline in September quarter net profit at Rs 1,331 crore, pulled down majorly by concerns on asset quality.
     The bank decided to set aside an additional Rs 525 crore as prudential provisions due to challenges in the operating environment.
     It earned less in interest income because of higher slippage and a dip in income because of microlending portfolio de-growth, which impacted the profits.
     It's chief executive and managing director Sumant Kathpalia sought to assuage any concerns and said the management is confident about the overall trajectory of the business not getting derailed, even though business performance has trailed targets for the two consecutive quarters.
     The core net interest income grew only at 5 per cent on-year to Rs 5,347 crore on a 13 per cent loan growth and a 0.21 per cent contraction in the net interest margin at 4.08 per cent.
     Kathpalia admitted that the loan growth is much below the 18-20 per cent target set by the bank for itself as part of a medium-term plan, and added that margins will come back to normal levels of over 4.2 per cent by end of the fiscal.
     The contraction in margins was due to a 9 per cent de-growth in the higher interest earning micro finance book which the bank slowed down because of fears of asset quality impact and also efforts taken on upping the deposit mobilisation.
     Kathpalia said the bank is experiencing asset quality troubles in pockets in East India including Bihar and Jharkhand, and also the poll-bound Maharashtra. It is cautious about the segment overall, he added.
     Unlike peers, Kathpalia denied over-leveraging as being the reason for the challenges on the microfinance front, and added that the de-growth has led to the share of such loans in the overall book slipping to 9 per cent from the earlier levels of 12-13 per cent.
     The share of unsecured loans including personal loans and credit cards has been inside the guard rail of 6 per cent which the bank has been following.
     The fresh slippages came at nearly Rs 1,800 crore, and the gross non-performing assets ratio moved up to 2.11 per cent from the 2.02 per cent in the quarter-ago period.
     This resulted in the provisions and contingencies shooting up 87 per cent to Rs 1,820 crore and Kathpalia said the bank has taken a decision to take a short-term hit to the profits for strengthening the balance sheet for the long haul by taking additional Rs 525 crore provisions hit.
     The bank is seeing a pick-up in private capital expenditure, Kathpalia said, adding that the corporate lending grew at a faster clip of 14 per cent, and added that it is more optimistic about the performance of vehicle finance going forward.
     He also said that the second half of the fiscal will see higher credit growth, without sharing a number.
     The bank's overall capital adequacy was at a healthy 17.55 per cent with the core buffer at 16.15 per cent.
     Indusind Bank scrip closed 0.53 per cent up at Rs 1,278.90 a piece on the BSE on Thursday, as against a 0.02 per cent correction on the benchmark.

(This story has not been edited by THE WEEK and is auto-generated from PTI)