Banking Industry Developments:
- Major event was increase of 50 basis points in G-secs rate. As a result, bond portfolios of banks were severely hit especially trading portfolios in money market and G-secs.
- Monetary policy change led to hike of 25 basis points.
- Rupee depreciated about 5% in the quarter itself leading to more volatility that presented an opportunity to offset the MTM hits that bank got.
- For large borrowers, RBI introduced fixed loan component out of the working capital limits and the undrawn portion will have a 20% credit conversion factor.
- Minimum Support prices were raised which lead to increase in inflation by 25 basis points.
- Growth in Net Interest Income is 6% and loans is 4% q-o-q basis.
- Growth in Net Interest Income is 20% and loans is 29% y-o-y basis.
- Revenue Growth and net profit growth is 6% and 9% respectively.
- Loan book growth was 29% year-on-year and 4% q-o-q where 30% growth in corporate loans and 28% growth in vehicle finance and non-vehicle retail businesses.
- Above mentioned 29% growth is in spite of Rs. 8000 crores that were sold from corporate book.
- CASA growth rate was 37% y-o-y basis, of which SA growth was 51%.
- ROA growth was from 1.86% to 1.91%.
- ROE has grown to 17.25%.
- Cost-to-income ratio has gone down close to 44%.
- Earnings per share has also gone up to annualized Rs. 69.
- Net Interest Margin went down by 5 basis points.
- Credit cost shrank from 19 basis points to 14 basis points.
- The ARC book, SR book is at 33 basis points
- The Weighted average Risk score (WARS) for vehicle portfolio of this quarter is 1.77 (1 being the best), indicating that credit cost will slightly improve in next few quarters.
- The trading gains is Rs. 137 crores (fee line)
- Net gains are Rs. 51 crores
- Fee income has grown by 20%, but total free has grown by lower than that because of the fall in trading gains. Total fee is down from Rs. 181 crores to Rs. 111 crores because of that.
- Core fee has grown y-o-y and q-o-q basis
- Foreign exchange incomer has grown by 16%.
- Gross NPA is 1.15% which is lowest in industry.
- Restructured book is lowest among industry at 5 basis points
- Provisions absorbed the Rs. 86 crores mark to market quarter end loss
- Slippages reduced from 2.68% to 1.31%
- Provision coverage ratio is maintained at 56%.
Customer Base and Branch Growth:
- Customer base is 12 million
- 1 million new customers were added during the last quarter
- 10 new branches are work in progress
- Around 200 branches are on track to be opened in the full year
Mergers and Acquisition:
- The acquisition of ISSL, ILFS Securities and Services Limited is signed and should be closed in this quarter
- Bharat Financial merger is in its final leg and next step in to take approval from NCLT
Cost of Funds and Yield :
- Cost of deposit went up 22 basis points and cost of funds went up 35 basis points
- Yield on asset went up by 30 basis points leading to NIM going down by 5%
- Corporate yield has improved by 9 basis points and consumer yield has gone up by 4 basis points
- Risk-weighted asset to total asset ratio in last two years this quarter was 76% and 78% respectively, while it is 80% now.
- Growth in credit risk RWAA is 6.12% q-o-y vs. 3.3% loan book growth
- 33 base points comprise of 8 base points because of dividend payment and 25 base points on account of loan book growth which is BAU
- Distribution fees has gone up by 30% y-o-y basis
- This is because of momentum for insurance and investment business
- The fees also incorporate housing loans disbursal for HDFC
Vehicle Finance Market:
- Vehicle improvement is there in terms of freight rates and freight availability
- Finance market is only 20% for two wheelers, rest 80% are in cash or credit cards
- IndusInd Bank closes around 70,000 to 75,000 vehicles per month
Current Account Growth:
- CA business growth is 2-3% only in over five quarters
- Acquisitions need to be made to increase throughput to 20,000 from current 8,000-9,000 because of low average ticket size (Rs. 50,000 to Rs. 60,000)
- The reason for slow growth is advancement in payments space and cash management space
- OPEX growth has been arrested to a low number even after opening 200 branches
- Main reason is digitization related productivity gains leading to Rs. 200 crores being saved annually
- Business has grown by 25-30% even after reducing headcount by 300
- Cost to income ratio is targeted to be around 44%
Saving and Government Deposits:
- Government deposits are 15% to 20% of overall balance sheet
- SA will continue to grow at a stable rate.
- Currently, 1,25,000 accounts are there and target is of 1,50,000
- Moving from 16 markets today to 18 this year