IndusInd Bank is likely to report a 14 percent year-on-year net profit growth to Rs 2,128 crore in the July-September quarter for 2023-24 (Q2FY24) over the previous year led by stable asset quality and a strong pick-up in loan growth. The private sector lender’s Q2FY24 report card is due on October 18.
Net interest income (NII) is estimated to grow 19 percent to Rs 4,896 crore in Q2FY24 from Rs 4,302 crore in Q2FY23, according to an average estimate of five brokerages. However, rising cost of funds is likely to keep IndusInd’s NII growth flat on a quarter-on-quarter basis, said analysts. In Q1FY24, IndusInd’s NII stood at Rs 4,867 crore.
That said, net interest margins (NIMs) are expected to remain in a narrow range of 4.1-4.3 percent in Q2FY24 compared to 4.24 percent in Q2FY23 as the impact of deposit rate hikes start to reflect in the top-line of banks. Analysts expect margin compression to bottom out in the second half of this fiscal year (H2FY24) if there are no further changes in the Reserve Bank of India’s policy repo rate.
“From here on, as the cost of funds peaks in one or two quarters and the lending mix shifts in favour of better-yielding consumer loans versus corporate loans, NIMs should find support and we expect it to stabilise in the current range. Moreover, if the interest rate falls, IndusInd Bank may be a beneficiary,” analysts at Antique Broking said in a note.
ALSO READ: HDFC Bank Q2 earnings: Net profit rises 50% to Rs 15,976 crore
That apart, after the bank underwent a stressed asset quality cycle over the past few quarters, the slippage ratio and net slippage ratio declined to 1.9 percent and 0.7 percent, respectively in the April-June quarter of FY24.
This improving trend in slippages, analysts said, could continue and normalise in Q2FY24 as well.
In Q2FY24, IndusInd’s gross non-performing asset (GNPA) ratio is likely to further decline by 9 basis points (bps) sequentially to 1.8 percent, while the net non-performing asset (NNPA) ratio may drop by 5 bps to 0.5 percent, estimated analysts. (See table)
Furthermore, analysts do not see any meaningful rise in slippages. IndusInd Bank’s credit costs or cost associated with lending money to borrowers who may default on their loans is pegged to moderate by 36 bps annually to 1.4 percent in Q2FY24. But a marginal uptick of 8 bps is likely on a quarterly basis from 1.3 percent in Q1FY24.
ALSO READ: Bank of Maharashtra Q2 profit up 72% to Rs 920 crore on higher interest income
On the bourses, shares of IndusInd Bank jumped 4 percent in the July-September period 2023 against a 2 percent rise in the Sensex benchmark.
Q2 business update
In its second quarterly business update, IndusInd Bank reported that its net advances grew 21 percent to Rs 3.1 lakh crore from Rs 2.6 lakh crore in the year-ago period.
The lender’s deposits too saw a jump of 14 percent to Rs 3.5 lakh crore in Q2FY24 from Rs 3.15 lakh crore in Q2FY23.
Deposits from retail and small business customers climbed 4 percent on a yearly basis to Rs 1.57 lakh crore in Q2FY24.
The CASA (current account and savings account) ratio declined to 39.4 percent in the September-ended quarter from 42.4 percent in the year-ago period, indicating higher cost of funds.
ALSO READ: What makes veteran investor Govind Parikh cautious on banks?
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
