Release Date: October 28, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Indian Bank (BOM:532814, Financial) reported a 36% increase in net profit, driven by an 8% growth in net interest income and a 44% recovery in bad debts.
- The bank's business grew by 10%, with credit growth at 12% and retail credit increasing by 15%.
- Asset quality improved, with gross NPA reducing from 3.77% to 3.48% and net NPA decreasing, supported by a provision coverage ratio increase from 96.6% to 97.7%.
- The bank maintained a strong capital adequacy ratio of 16.55%, which increases to 17.84% when including half-yearly profits.
- Digital transformation initiatives have been successful, with 91% to 92% of transactions now occurring digitally, and significant growth in UPI users and net banking users.
Negative Points
- Business growth in the first half of FY25 was relatively low, with deposit growth at only 0.75% and credit growth at 3.16%, raising concerns about meeting full-year targets.
- The SMA book increased slightly due to a large government-guaranteed account, indicating potential stress in certain segments.
- The bank's reliance on borrowings has increased, which could impact liquidity and financial stability if not managed carefully.
- There is a need to raise significant deposits and disburse substantial credit in the remaining months to meet annual targets, posing a challenge.
- The housing finance book saw a significant reduction, with a major account being prepaid, impacting the overall loan book mix.
Q & A Highlights
Q: What is the roadmap for achieving the growth targets in deposits and credit for FY 25, given the current growth rates?
A: Shri Shanti Lal Jain, MD & CEO, explained that the growth in the first half is on track with previous trends. The bank has sanctioned 20% more than last year, with a strong pipeline of undisbursed term loans and working capital limits. The focus remains on profitable growth rather than just credit growth.
Q: Can you provide more details on the SMA 2 account that has increased significantly?
A: The increase in SMA 2 is primarily due to one government-guaranteed account, which has moved from SMA 2 to SMA 1 after partial payment. This account was responsible for a significant portion of the increase.
Q: What is the outlook for recoveries, especially with NCLT and NARCL?
A: The bank expects to achieve its recovery target of INR 7,000 crore to INR 7,500 crore. They have a substantial pool of accounts in NCLT and are confident in maintaining recovery momentum, with several accounts poised for resolution.
Q: How is the treasury performance expected to evolve, especially with potential rate cuts?
A: The bank has strategically managed its investment portfolio, maintaining a yield above the 10-year G-SEC rate. They anticipate continued profitability in treasury operations, leveraging market movements and maintaining a strong position.
Q: What is the status of the Ind Bank Housing subsidiary, and how does it align with RBI's draft circular on investments?
A: The bank is in the process of closing Ind Bank Housing, as it has been inactive for years. They are selling off its assets, and this decision is independent of the RBI's draft circular.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
