Private sector lender IndusInd Bank is expected to report a robust 34 percent growth in net profit for the first quarter of this fiscal amid healthy disbursals due to higher exposure to the consumer loans sector than its peers, average estimate of three brokerages showed.
IndusInd Bank had logged in a standalone net profit of Rs 1,603.3 crore in the first quarter of the previous fiscal - up 5 percent from Rs 2,040.5 crore in Q4 FY23.
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Analysts also expect its net interest income (NII) — the difference between interest earned and interest paid – to climb 15.6 percent on-year to Rs 4,770 crore, compared to Rs 4,125.3 crore in Q1 FY23. The lender’s NII stood at Rs 4,669.5 crore in the three months to March 2023, with net interest margin (NIM) at 4.28 percent.
“The bank is expected to deliver improved performance across business parameters in 1Q FY24, which will help it to deliver strong RoA (return on assets) led by healthy growth in loan book and stable NIM,” analysts at domestic brokerage Ashika said.
“We expect NIM to remain comfortable on the back of greater proportion of consumer loan sector, stabilization of deposit cost and decrease in future risk cost. Loan growth has gradually improved over the last few quarters,” they said.
Shares of IndusInd Bank were trading 0.51 percent up at Rs 1,399.70 on the BSE at 10.15am. The shares are up 14 percent on a year-to-date basis, while the one-year return stands at 64 percent.
Q1 business update
In its business update for the first quarter of this fiscal, IndusInd Bank clocked a 21 percent rise in net advances to Rs 3.01 lakh crore, as against Rs 2.47 lakh crore a year back. On a sequential basis, advances increased 4 percent.
Deposits also grew 15 percent on-year to Rs 3.47 lakh crore and 3 percent on-quarter. Retail deposits and deposits from small business customers amounted to Rs 1.5 lakh crore as of June 30, as against Rs 1.4 lakh crore as of March 31.
Also Read: Brokerages bullish on HDFC Bank post steady Q1 earnings
However, the lender's CASA (current account and savings account) ratio slipped to 39.9 percent in Q1, its lowest is 24 quarters, from 43.2 percent in the year-ago period.
CASA is a cheap source of funds which helps boost banks’ NIMs – a key measure of profitability.
Nuvama Institutional Equities expects the bank’s NIM to remain stable QoQ and credit cost to moderate. “In its business update, the bank has reported healthy loan growth of 3.8 percent QoQ and deposit growth of 3.2 percent QoQ,” it noted.
Experts said healthy credit offtake momentum, stable margins, strong treasury operations and relatively muted credit cost are expected to drive healthy performance of banks across segments in 1Q FY24.
The RBI’s pause on interest rate hikes is a positive for lenders on the cost of funds front, though the monetary policy will be the key factor to monitor in FY24.
Healthy loan demand is providing comfort to analysts at this juncture. “Banks are one of the safest stories right now. You just need to have them in your portfolio. You can’t go much wrong there. Retail loan book is not growing much, but given the strength of the corporate balance sheets, the risk of NPAs are the lowest in a very long time,” said Siddharth Bhamre, Research Head at Religare Broking.
“Retail loan book still has plenty of scope for growth. Household debt is at manageable levels. And while incomes have not been rising fast, aspirations surely are. Also, the commodity cycle is down right now, but the companies will start borrowing to expand capacity for the next upcycle,” he said.
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