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IndusInd Bank is poised to unveil a robust performance in the July-September quarter of 2023-24 (Q2FY24), with a projected 14% year-on-year growth in net profit to reach Rs 2,128 crore. This growth can be attributed to the bank’s stable asset quality and a significant increase in loan activity. The bank is scheduled to release its Q2FY24 financial report on October 18.
Analysts estimate that the net interest income (NII) will see a substantial 19% rise to Rs 4,896 crore in Q2FY24, compared to Rs 4,302 crore in Q2FY23. However, the increasing cost of funds may lead to a relatively flat NII growth on a quarter-on-quarter basis. In the previous quarter (Q1FY24), IndusInd Bank reported NII of Rs 4,867 crore.
Nevertheless, the net interest margins (NIMs) are expected to remain within a narrow range of 4.1-4.3% in Q2FY24, as compared to 4.24% in Q2FY23, as the effects of deposit rate increases become evident in banks’ top-line figures. Analysts anticipate that margin compression will stabilize in the second half of this fiscal year (H2FY24) unless there are further changes in the Reserve Bank of India’s policy repo rate.
Antique Broking analysts noted that as the cost of funds peaks in the coming quarters and the lending mix tilts in favor of consumer loans with better yields, NIMs should stabilize within the current range. Additionally, if interest rates decline, IndusInd Bank may benefit from this trend.
After experiencing a period of stressed asset quality, the bank has shown improvement in the slippage ratio and net slippage ratio, which decreased to 1.9% and 0.7%, respectively, in the April-June quarter of FY24. This positive trend in slippages is expected to continue and normalize in Q2FY24.
In Q2FY24, IndusInd Bank’s gross non-performing asset (GNPA) ratio is projected to decrease by 9 basis points (bps) sequentially to 1.8%, while the net non-performing asset (NNPA) ratio may decrease by 5 bps to 0.5%, according to analysts’ estimates. Furthermore, analysts do not anticipate a significant increase in slippages. The bank’s credit costs are anticipated to moderate annually by 36 bps to 1.4% in Q2FY24, with a marginal uptick of 8 bps on a quarterly basis from 1.3% in Q1FY24.
In its second quarterly business update, IndusInd Bank reported a 21% growth in net advances, reaching Rs 3.1 lakh crore from Rs 2.6 lakh crore in the previous year. Deposits also saw a 14% increase to Rs 3.5 lakh crore in Q2FY24, compared to Rs 3.15 lakh crore in Q2FY23. Deposits from retail and small business customers experienced a 4% increase year-on-year, reaching Rs 1.57 lakh crore in Q2FY24.
The CASA (current account and savings account) ratio declined to 39.4% in the September-ended quarter from 42.4% in the previous year, indicating higher funding costs.
