IndusInd Bank drop 4% on sharp rise in slippages

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Shares of IndusInd Bank fell 4.5 percent intraday on January 14 after the lender reported sharp increase in gross slippages due to one travel account.

In fact, the stock had rallied around 3 percent after robust earnings growth, but wiped out those gains immediately on slippages numbers and overall corrected 7 percent from its day's high.

It was quoting at Rs 1,479.45, down Rs 61.00, or 3.96 percent on the BSE the time of publishing this copy.

The bank has detected fraud with respect to two entities and provisions made as per RBI guidelines. Sources told CNBC-TV18, the bank is likely to have declared DHFL and Cox & Kings exposures as 'fraud' in Q3.

The private sector lender registered a healthy 32 percent year-on-year growth in profit at Rs 1,300.2 crore in Q3 despite higher provisions. Net interest income, other income, operating income and lower tax cost boosted profitability.

Net interest income grew by 34.35 percent year-on-year to Rs 3,074 crore, with loan growth of 20 percent.

Slippages increased significantly to Rs 1,945 crore in Q3, from Rs 1,102 crore in Q2FY20. In fact, slippages were much higher than first half of FY20.

Asset quality improved in the quarter ended December 2019 with gross non-performing assets (NPA) falling to 2.18 percent in Q3 (from 2.19 percent QoQ). Net NPA also declined to 1.05 percent during the quarter against 1.12 percent in the previous quarter.

Provisions and contingencies for the quarter stood at Rs 1,043.4 crore, which increased sharply by 41.4 percent sequentially and 72 percent year-on-year.

Other income (non-interest income) shot up 22 percent year-on-year to Rs 1,789.40 crore and pre-provision operating profit grew by 29.7 percent to Rs 2,745.64 crore in Q3FY20.

Romesh Sobti said operating profit grew at 30 percent, hitting an all time high and the bank has seen significant improvement in net NPA.

"Microfinance businesses are back to growth momentum, showing a growth of 10 percent QoQ while non-vehicle retail book grew by 17 percent during the quarter and corporate loan book rose by 8 percent," he added.

He said the bank has seen significant pre-payments and recoveries in the quarter.

"Loans to NBFCs have reduced to 3.2 percent of total loan book. NBFC book was steady despite operating issues in sector. The slowdown in NBFC sector has hit consumption demand," Sobti said, adding NBFCs must get back to lending if consumption is to pick up.