Private lender IndusInd Bank delivered a steady March quarter performance, with profit surpassing Street expectations even as revenue remained largely in line, according to a note by Nuvama Institutional Equities. The improvement in earnings was primarily supported by lower operating expenses and a moderation in credit costs.
The bank reported a sequential rise in net interest margin (NIM), which improved by four basis points to 3.39 per cent. However, core operating performance remained under pressure, with core pre-provision operating profit (PPOP) declining 7 per cent quarter-on-quarter, broadly in line with estimates.
Earnings supported by lower credit costs
Profitability saw a sharp boost during the quarter, with profit after tax rising 3.3 times on a sequential basis. The improvement came largely on the back of easing credit costs, which declined to 1.9 per cent from 2.6 per cent in the previous quarter, although they remain above the bank’s normalised range.
Net interest income (NII) fell 4 per cent sequentially but showed strong year-on-year growth when adjusted for one-off items. Meanwhile, core fee income and operating expenses both declined 3 per cent quarter-on-quarter, weighing on operating momentum.
Asset quality improves, but pockets of stress persist
Asset quality trends improved meaningfully, with gross slippages declining 29 per cent sequentially to Rs 18.25 billion. The improvement was largely led by the microfinance segment, where slippages dropped sharply by over 50 per cent.
The slippage ratio improved to 2.1 per cent from 2.8 per cent in the previous quarter. Vehicle finance also saw a notable reduction in stress, while rural and consumer banking segments reported lower slippages. However, stress levels in SME and wholesale segments edged up slightly.
Gross non-performing assets (GNPA) and net NPAs improved to 3.43 per cent and 1.04 per cent, respectively. Write-offs declined sequentially but remained elevated. Provision coverage ratio (PCR) stayed largely stable at around 71 per cent.
Focus on steady growth and profitability
The bank’s management expects credit costs to have peaked, subject to macroeconomic stability, and sees further moderation ahead. It is targeting loan growth in line with the broader banking system in FY27, with a focus on mid-market, SME, and retail segments.
Liquidity remains comfortable, with the bank planning to maintain its liquidity coverage ratio (LCR) in the range of 115–120 per cent. It has also indicated that there are no immediate plans to raise capital, as the current capital base is considered sufficient to support growth through FY27.
