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Last Updated : Oct 30, 2020 07:46 AM IST | Source: Moneycontrol.com

IndusInd Bank Q2 Preview: Profit may fall sharply amid higher COVID-19 related provisions

Kotak Institutional Equities too expects the bank to make higher provisions resulting in negligible profits but feels it will help towards building higher contingent provisions.

 
 
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Private sector lender IndusInd Bank will report its September quarter results on October 30. The bank is expected to show a significant fall Q2 FY21 earnings with likely increase in COVID-19 related provisions and tepid operating performance.

Profit for the quarter could fall more than 60 percent year-on-year (YoY) as provisions are likely to increase in the range of 100-200 percent YoY, though the same may decline sequentially.

"We have factored in higher provisions (up 150 percent YoY), as we expect the bank to shore up coverage and build higher COVID-19 related provisions. We expect earnings to dip 63.9 percent YoY (up 8 percent QoQ)," HDFC Securities said.

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Kotak Institutional Equities too expects the bank to make higher provisions resulting in negligible profits but feels it will help towards building higher contingent provisions.

Net interest income during the quarter is expected to increase around 10 percent YoY with around a percent loan growth and 10 percent growth in deposits compared to the year-ago period.

"We expect a weak performance on operating metrics. Loan growth will likely be at around 1 percent YoY while NIM (reported) is likely to decline to 4 percent as we expect a slower decline in cost of funds as compared to the decline in lending yields. We expect a weaker performance on fee income growth," said Kotak Institutional Equities.

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Deposit growth is positive, giving comfort that the environment to mobilise deposits has improved for the bank, the brokerage added.

Motilal Oswal also feels loan growth will continue to witness pressure, while deposits will show strong traction on QoQ basis.

"Asset quality will remain pressured, led by higher strain on MFI and auto businesses; collection efficiency is key," said the brokerage.

Commentary on commercial vehicle portfolio, expected restructuring of loans by Q4 FY21 and guidance on credit costs given the exposures that are also likely to be affected by COVID would be the key monitorable.
First Published on Oct 30, 2020 07:46 am
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