Exposures to HFC and travelling company have been recognized as fraud and have made provisions of around Rs 240 crore on them.
IndusInd Bank, the private sector lender, registered a 32 percent growth in Q3FY20 profit and 34.3 percent growth in net interest income compared to the same quarter last year.
Asset quality was also stable with gross non-performing assets (NPA) in Q3 falling 1bps to 2.18 percent and net NPA declining 7bps to 1.05 percent QoQ, but the key disappointment was a sharp rise in slippages.
The lender reported slippages for the quarter at Rs 1,945 crore, significantly higher compared to Rs 1,102 crore in the previous quarter as Romesh Sobti, MD & CEO, confirmed to CNBC-TV18 that the bank declared DHFL and Cox & Kings' exposure as frauds.
Hence, provisions jumped sharply to Rs 1,043.4 crore for the quarter ended December 2019, against Rs 737.7 crore in the September quarter and Rs 606.7 crore in December quarter 2018.
Here are key highlights from IndusInd Bank's conference call by Narnolia Financial Advisors:
Management Participants: Ramesh Sobti - MD & CEO
Management said that the operating environment remains tough, however, there is some evidence of stabilisation of economic activity at lower levels.
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Management made accelerated provisioning of Rs 252 crore during the quarter totalling to Rs 600 crore in the last two quarters. Accelerated provisioning was mainly provided on the IL&FS group. PCR on this account has increased to 73 percent.
Exposures to HFC and travelling company have been recognized as fraud and have made provisions of around Rs 240 crore on them. Full 100 percent provisions on these accounts have been made of which 25 percent is routed through P&L and rest is debited through reserve and surplus which would be reversed through P&L in next three quarters.
The provisions were made from reserve considering that there could be resolution going forward for the housing finance company and expect LGD of around 50 percent based on present value of the cash flow.
The exposure to the three stressed groups' one each in Media / Diversified / Housing Finance sectors has been reduced to 0.47 percent from 1.9 percent in Q4FY19. Consolidated security cover of 169 percent for the exposures, of which marketable security in the form of listed shares covers 27 percent of the total exposure as on date.
The banks have received prepayments and repayments of around Rs 7,000 crore for period of last three quarters. It had requested for prepayment of loan from HFC real estate group and hence the exposure has declined significantly. This has also contracted the loan growth of the bank.
On growth in the microfinance, Management said that it had slowed down in Assam about two to three months back and slowed down in West Bengal itself but rest of growth has been secular from rest of the country.
On two-wheelers, growth management said the growth has been due to festive season sales. The market share increase has not been very significant.
Barring IL&FS, credit cost guidance is around 60-70 bps going in next fiscal.SMA trends in the commercial vehicle (CV) business have improved during the quarter, however, there has not been an improvement on YoY basis.
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