IndusInd Bank, one of the leading private sector banks in India, reported a 22% year-on-year (YoY) increase in its net profit for the second quarter (Q2) of the financial year 2023-24, beating the market expectations. The bank posted a net profit of Rs 2,202 crore for the quarter ended September 30, 2023, compared to Rs 1,806 crore in the same period last year. The net profit was higher than the average estimate of Rs 2,128 crore by five brokerages.
The main driver behind the bank’s impressive performance was its healthy growth in net interest income (NII), which is the difference between the interest earned from lending activities and the interest paid. The NII rose by 18% YoY to Rs 5,076 crore in Q2, from Rs 4,302 crore in Q2 last year. The NII was also higher than the analysts’ expectations of Rs 4,896 crore. The bank’s net interest margin (NIM), which is a key indicator of profitability, remained stable at 4.1% in Q2.
Another factor that contributed to the bank’s strong performance was its improvement in asset quality, which reflects the quality of its loans and advances. The bank’s gross non-performing assets (NPAs), which are loans that are overdue for more than 90 days, declined to 1.93% of its total advances in Q2, from 2.11% in Q2 last year. The net NPAs, which are gross NPAs minus provisions, also fell to 0.57% of its net advances in Q2, from 0.61% in Q2 last year. The bank’s provision coverage ratio (PCR), which is the percentage of provisions made against bad loans, improved to 77% in Q2, from 75% in Q2 last year.
The bank’s loan growth also remained robust in Q2, despite the challenges posed by the COVID-19 pandemic and its impact on the economy. The bank’s total advances grew by 14% YoY to Rs 2.44 lakh crore in Q2, from Rs 2.14 lakh crore in Q2 last year. The bank’s retail loan portfolio, which consists of loans to individuals and small businesses, grew by 16% YoY to Rs 1.06 lakh crore in Q2, from Rs 91,522 crore in Q2 last year. The bank’s corporate loan portfolio, which consists of loans to large and medium enterprises, grew by 13% YoY to Rs 1.38 lakh crore in Q2, from Rs 1.23 lakh crore in Q2 last year.
The bank’s deposit growth also remained strong in Q2, indicating its ability to attract and retain customers. The bank’s total deposits increased by 15% YoY to Rs 3.01 lakh crore in Q2, from Rs 2.62 lakh crore in Q2 last year. The bank’s current account savings account (CASA) ratio, which is the ratio of low-cost deposits to total deposits, improved to 43.9% in Q2, from 41.4% in Q2 last year. The bank’s cost-to-income ratio (CIR), which is the ratio of operating expenses to operating income, improved to 47.7% in Q2, from 49.8% in Q2 last year.
The bank’s capital adequacy ratio (CAR), which is the ratio of capital to risk-weighted assets, remained comfortable at 17.6% in Q2, well above the regulatory requirement of 11.5%. The bank’s return on assets (ROA), which is the ratio of net profit to total assets, improved to 1.6% in Q2, from 1.4% in Q2 last year. The bank’s return on equity (ROE), which is the ratio of net profit to shareholders’ equity, improved to 13.7% in Q2, from 11.8% in Q2 last year.
The bank’s management expressed confidence in its performance and outlook for the future. The bank’s managing director and CEO Sumant Kathpalia said, “We have delivered a strong performance in Q2, driven by our core operating metrics of NII, NIM, fee income, and operating profit. Our asset quality has improved significantly, and we have maintained adequate provisions for contingencies. We have also grown our loan book and deposits at a healthy pace while maintaining our cost efficiency and capital adequacy. We are confident of sustaining this momentum in the coming quarters and delivering value to our stakeholders.”
The bank’s Q2 results reflect its resilience and growth potential in the Indian banking sector, which is undergoing a phase of consolidation and digital transformation. The bank has been able to leverage its strong brand, customer base, product portfolio, technology platform, and distribution network to overcome the challenges posed by the pandemic and the competitive environment. The bank has also been able to diversify its revenue streams, optimize its cost structure, enhance its risk management, and strengthen its capital position. The bank’s Q2 results reveal the secret behind its impressive performance: a balanced and sustainable approach to banking.
This post The Secret Behind IndusInd Bank’s Impressive Q2 Results was originally published at Finance Crave
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