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IndusInd Bank’s well-diversified loan portfolio, improving share of low-cost deposits and good asset quality continued to help it deliver healthy earnings.
Post the Reserve Bank of India’s liquidity tightening measures in July, there were concerns that the bank’s higher dependence on wholesale short-term deposits could increase its cost of funds and, hence, affect its net interest margins (NIM); sixty-five per cent of the bank’s deposits and borrowings are in the less-than-one-year category.
Despite this, IndusInd Bank has been able to log a healthy 32 per cent growth in earnings during the September quarter.
The bank’s return on assets, at 1.7 per cent, is on a par with most leading private sector banks. The NIM has declined only marginally over the last quarter.
IndusInd Bank has been building its retail presence, more than doubling its branches in the last three years.
This has helped improve significantly its low-cost CASA (current account and savings account) deposits, which now stand at 32 per cent of the total deposits.
The bank’s growing CASA mix has helped offset to some extent the pressure of the increase in cost of funds. There has also been a marginal, 10 basis points, rise in loan yields.
After growing 29 per cent annually over the last three years, the bank’s loan book continues its strong run, logging 24 per cent growth during the September quarter, well above the industry average.
The current loan portfolio is equally split between the corporate and retail segments.
Post the Reserve Bank of India’s liquidity tightening measures in July, there were concerns that the bank’s higher dependence on wholesale short-term deposits could increase its cost of funds and, hence, affect its net interest margins (NIM); sixty-five per cent of the bank’s deposits and borrowings are in the less-than-one-year category.
Despite this, IndusInd Bank has been able to log a healthy 32 per cent growth in earnings during the September quarter.
The bank’s return on assets, at 1.7 per cent, is on a par with most leading private sector banks. The NIM has declined only marginally over the last quarter.
IndusInd Bank has been building its retail presence, more than doubling its branches in the last three years.
This has helped improve significantly its low-cost CASA (current account and savings account) deposits, which now stand at 32 per cent of the total deposits.
The bank’s growing CASA mix has helped offset to some extent the pressure of the increase in cost of funds. There has also been a marginal, 10 basis points, rise in loan yields.
After growing 29 per cent annually over the last three years, the bank’s loan book continues its strong run, logging 24 per cent growth during the September quarter, well above the industry average.
The current loan portfolio is equally split between the corporate and retail segments.
Asset quality
The bank has been able to maintain its asset quality. Gross non-performing assets, at 1.1 per cent, have increased only marginally from the previous quarter. Restructured assets, at 0.31 per cent of loans, are also within comfort levels.
The bank was able to maintain the provision-coverage ratio at 80 per cent of non performing assets, despite minimal treasury gains.
In the previous quarter, the bank had made use of the sharp treasury gains to improve its coverage.
The sixth-largest private sector bank has always traded at a premium to ICICI Bank and Axis Bank as it has been growing much faster than its peers.
The stock is now trading at 2.4 times its one-year forward book value, which is close to its historical average.
radhika.merwin@thehindu.co.in
Source: thehindubusinessline
The bank was able to maintain the provision-coverage ratio at 80 per cent of non performing assets, despite minimal treasury gains.
In the previous quarter, the bank had made use of the sharp treasury gains to improve its coverage.
The sixth-largest private sector bank has always traded at a premium to ICICI Bank and Axis Bank as it has been growing much faster than its peers.
The stock is now trading at 2.4 times its one-year forward book value, which is close to its historical average.
radhika.merwin@thehindu.co.in
Source: thehindubusinessline
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