Release Date: October 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- IndusInd Bank Ltd (BOM:532187, Financial) reported a healthy retail deposit growth with a 16% year-on-year increase, indicating strong customer trust and deposit mobilization.
- The bank's vehicle finance segment outperformed industry volumes, showing a 10% year-on-year growth, which highlights its competitive edge in this sector.
- Digital banking initiatives are gaining traction, with over 1.4 million accounts opened and significant transaction volumes, reflecting successful digital transformation efforts.
- The corporate banking segment showed robust growth, particularly in mid and small corporates, with a 16% year-on-year increase, demonstrating effective corporate client engagement.
- The bank maintained a strong liquidity position with an average Liquidity Coverage Ratio (LCR) of 118%, ensuring financial stability and resilience.
Negative Points
- The microfinance segment faced challenges with subdued growth and increased stress, leading to higher slippages and credit costs.
- Net interest margin declined to 4.08% from 4.25% quarter-on-quarter, impacted by lower loan yields and a cautious stance on unsecured lending.
- The bank's cautious approach in certain segments, such as microfinance and credit cards, resulted in slower loan growth, affecting overall profitability.
- Contingent provisions were increased as a precautionary measure, impacting short-term earnings and reflecting concerns over potential credit risks.
- Fee income growth was weaker than expected, affected by lower treasury fees and regulatory changes impacting credit card fees.
Q & A Highlights
Q: Can you explain the significant rundown in the MFI book and the SMA 01 to pull particularly for the MFI?
A: Our disbursements were at 8,500 crore in Q1 and 7,050 crore in Q2, against an average rate of 12,000 to 13,000 crore. This led to a rundown in the book as payments are coming in. The 30 to 90 DPD is currently at 4%.
Q: How do you see the forward flow in MFI resolving, and when do you expect it to reverse?
A: We are seeing some resolution in the bucket in October, and we expect the 30 to 90 DPD to reduce to less than 1% by Q3 or Q4.
Q: What is the rationale behind the creation of the contingency buffer this quarter?
A: The buffer was created as a prudent measure due to the stress in the operating environment. It is not intended for immediate use but to fortify the balance sheet against any unforeseen events.
Q: How do you foresee loan growth for the full year given the cautious stance in certain segments?
A: We remain cautiously optimistic. If the market improves, especially in microfinance, and our portfolio quality enhances, we will increase disbursements. We expect better growth in vehicle finance in the second half of the year.
Q: Can you provide insights into the credit cost trajectory for MFI and its impact on overall guidance?
A: We are focusing on stabilizing flows in the 60 to 90 DPD bucket. Historically, 60% to 70% of this flows into NPAs, but we aim to reduce it to 40% to 50%. We expect the consumer and vehicle finance businesses to offset some of the MFI credit costs.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
