IndusInd Bank Q1 profit beats estimates, up 26% but asset quality deteriorates further

IndusInd Bank started off the year on a strong note by reporting better-than-expected earnings in June quarter but asset quality deterioration continued for the second consecutive quarter.

Profit during the quarter grew by 26.5 percent year-on-year to Rs 836.55 crore despite higher provisions and weak asset quality. The growth was driven by other income, net interest income and operating income.

Net interest income, the difference between interest earned and interest expended, increased 30.8 percent to Rs 1,774.06 crore YoY, with loan growth of 24 percent.

The bank said total deposits as on June 2017 stood at Rs 1.33 lakh crore, up by 31 percent compared with Rs 1.01 lakh crore, with saving accounts growing at 65 percent YoY.

CASA (current accounts- savings accounts) Ratio improved to 37.78 percent against 34.43 percent in June 30, 2016, it added.

Provisions for bad loans increased significantly by 34.5 percent to Rs 310 crore compared with year-ago quarter but fell 28 percent sequentially as there was one-off provision of Rs 122 crore against a large corporate account in Q4FY17.

Asset quality weakened further in the quarter ended June 2017, with the gross non-performing assets increased to 1.09 percent (from 0.93 percent in Q4FY17) and net NPAs rose to 0.44 percent (0.39 percent) on sequential basis.

In absolute terms, gross NPAs jumped 20.5 percent quarter-on-quarter to Rs 1,271.7 crore and net NPAs increased 15.8 percent to Rs 508.3 crore in June quarter.

Other income or non-interest income during the quarter grew by 20 percent to Rs 1,167.3 crore and operating profit jumped 28.8 percent to Rs 1,588.53 crore compared with same quarter last year.

The bank said capital adequacy ratio improved to 16.18 percent in June quarter 2017 from 15.42 percent June quarter 2016 and 15.31 percent in March quarter.

Prakash Diwan of Altamount Capital Management said he would continue to hold the stock due to decent numbers.

The stock price is flat as the company did not disappoint on earnings front, though asset quality weakened. At 13:18 hours IST, the stock price was quoting at Rs 1,558.00, down 0.12 percent after hitting a 52-week high of Rs 1,571.50.