IndusInd Bank hits over seven-month high; advances 33% in 6 days

 Shares of IndusInd Bank hit an over seven-month high of Rs 777.80, up 5 per cent on the BSE on Monday. The stock of the private sector lender was trading higher for the six straight trading session and has rallied 33 per cent during the period. It was quoting at its highest level since March 13, 2020.

In the September quarter (Q2FY21), the overall asset quality performance of IndusInd Bank was encouraging as gross non-performing assets (NPA) and net NPA ratio declined by 32 bps and 34 bps to 2.21 per cent and 0.52 per cent, respectively. Much of it may be attributed to the bank’s recent practice of recognising the asset quality pain upfront. Provisioning cost rose by 166 per cent year-on-year (YoY) to Rs 1,964 crore in Q2.

Net interest income or NII grew by 13 per cent year-on-year (down one per cent sequentially) and net profit fell by a whopping 53 per cent over last year.

“Post balance sheet realignment, the management is geared to pedal growth ahead with a focus on certain segments. Thus, we expect business momentum to pick from here on with operational parameters expected to show improvement. Improving collection efficiency and ample provision buffer is expected to arrest volatility in earnings but return ratios are seen improving gradually to 9.3 per cent in FY22E. Further, the quantum of advances to be restructured remains key monitorable. Therefore, until clarity emerges on asset quality front, we maintain our HOLD rating,” ICICI Securities said in result update.

“The credit growth remained subdued, but deposits have bounced back strongly after a scare in Q4. After dragging its feet for long, IndusInd Bank has made additional Covid-19-related floating provisions of Rs 950 crore, with the cumulative provisioning buffer now at a reasonable level of Rs 2,150 crore (1.1 per cent of loans), still lower than larger peers like ICICI/Axis. Management’s focus on building a granular retail portfolio is long-term positive but needs to manage asset quality, given elevated risk environment amid Covid-19-led disruption,” analysts at Emkay Global Financial Services said in result update.

IndusInd Bank Q2 net profit dips 53.2% on higher Covid-19 provisioning

 A cursory reading of IndusInd Bank September quarter (Q2) results seems uninspiring. Net interest income or NII grew by 13 per cent year-on-year (down one per cent sequentially) and net profit fell by whopping 53 per cent over last year. These numbers were below the Street’s estimates.

However, the positive aspect is the bank’s improving asset quality. Gross non-performing assets (NPA) ratio increased by only two basis points (bps) year-on-year to 2.21 per cent – the slowest NPA accretion rate so far. Without the Supreme Court’s standstill it would have risen by 12 basis points year-on-year to 2.31 per cent, still better that past performance. Net NPA ratio easing to 0.52 per cent from 1.12 per cent a year-ago and also below FY20’s 0.91 per cent reiterates an improvement in asset quality trend. Much of it may be attributed to the bank’s recent practice of recognising the asset quality pain upfront. Provisioning cost rose by 166 per cent year-on-year to Rs 1,964 crore in Q2.

Does this indicate that the worst is behind IndusInd Bank? Perhaps not. Of the total Rs 399 crore of gross slippages (loans turning bad), only Rs 13 crore came from corporate book - lowest in many years and may be a one-off. “We are in the process of identifying loan accounts for restructuring,” said Sumant Kathpalia, MD & CEO, IndusInd Bank. He expects the restructured book to be in single low-digit, but guides that the likelihood of lumpy bad loan accrual is less likely going ahead. The retail book, on the other hand, witnessed pain from across the board and the management feels it would be tough to estimate retail slippages.

The interesting part though was Kathpalia’s shift in focus from balance sheet realignment to scaling of business, nearly two quarters after assuming charge. The bank aims at fortifying market share in the vehicle finance space and improving its visibility in other products. That said, the management has refrained from giving any credit growth guidance for FY21, which is comforting as it suggests that the bank may not chase growth at the cost of quality.

On the whole, analysts say, IndusInd Bank’s performance on bad loans front appears convincing. “The worst periods of FY19 and FY20 may not repeat and bad loans seem taken care of,” said an analyst from a foreign brokerage. However, even as the stock has underperformed the Nifty Bank index by 60 per cent year-to-date in 2020, the analyst feels that it may remain a laggard in the near-term. And, a full-blown recovery in the stock may take a while.

IndusInd Bank hits fresh 3-year low after clarification on new CEO

Shares of IndusInd Bank have slipped 3 per cent to Rs 1,102 on the BSE on Thursday after the private sector said that the speculation around the name of Rajiv Sabharwal of Tata Capital as a contender for the bank’s top position is completely untrue.

IndusInd Bank was trading at its lowest level since January 4, 2017. The stock has fallen below its previous low of Rs 1,109 touched on Tuesday, February 18, 2020.

A Business Standard today reported that IndusInd Bank is considering Rajiv Sabharwal of Tata Capital as a probable candidate for the post of managing director (MD) and chief executive officer (CEO) of the bank. 

The bank, however, has issued a clarification against this report and has denied any such plans.

“We wish to state that the speculation around this name as a contender for the position mentioned is completely untrue,” IndusInd Bank said on clarification of the news report. “As previously advised to the exchanges, the Bank's Nomination and Remuneration Committee and Board had considered and finalised a potential candidate for the post of MD and CEO, and forwarded an application to the RBI seeking approval for the appointment. That position remains unchanged,” it added. READ THE CLARIFICATION HERE

Ramesh Sobti’s term as MD and CEO of IndusInd Bank will end on March 23.

Sharp decline

In the past two months, IndusInd Bank has plunged 28 per cent at the bouses on account of the risk of further asset quality deterioration. In comparison, the S&P BSE Sensex has gained 5 per cent during the same period.

“Over the last few quarters, the bank has seen deterioration in its asset quality, particularly in the corporate segment. Tight refinancing conditions for borrowers were a key trigger for the crystallization of nonperforming loans (NPLs),” Moody's Investors Service said on February 11. The rating agency downgraded the private lender’s outlook to negative from stable.

Analysts at JP Morgan have ‘neutral’ rating on IndusInd Bank as the brokerage firm believe higher interest rates will exert some pressure on IIB’s relatively nascent deposit franchise and loan growth in the commercial vehicle book. Investors will also need to take a view on the strategy outlook beyond FY21 after Mr. Sobti’s retirement. Further, we think IndusInd Bank’s relative P/BV differential versus HDFC Bank should moderate as markets start giving a higher valuation to stable deposit franchises, analysts at JP Morgan added.

At 02:13 pm; IndusInd Bank was trading 2 per cent lower at Rs 1,112 on the BSE, against 0.71 per cent decline in the S&P BSE Sensex. A combined 5.2 million shares changed hands on the counter on the BSE and NSE so far.

IndusInd Bank CEO race gets interesting as Tata Capital's Sabharwal enters

The contest to succeed Romesh Sobti at IndusInd Bank has got a little more interesting with the lender considering Rajiv Sabharwal of Tata Capital as a probable candidate.

It is now a two-way race between Sabharwal, Tata Capital’s managing director (MD) and chief executive officer (CEO), and Sumant Kathpalia, head of consumer banking at the Hindujas-promoted bank, according to sources in the know.

This is probably the first instance where the chief of a non-banking financial company (NBFC) is being considered for the corner office at a bank. When contacted, Tata Capital said: “The information is completely untrue.” Sobti’s term as MD and CEO of IndusInd Bank will end on March 23.

Outsiders have moved into the corner offices in two private sector banks — Amitabh Chaudhry from HDFC Life Insurance succeeded Shikha Sharma at Axis Bank, and Ravneet Gill from Deutsche Bank came into YES Bank after Rana Kapoor’s removal. Sandeep Bakhshi, who replaced Chanda Kochhar as ICICI Bank MD and CEO, was chief operating officer at the bank, and an ICICI group veteran of over three decades.

IndusInd Bank, however, doesn’t face any of the issues that cropped up ahead of the baton change at ICICI Bank, Axis Bank, and YES Bank. It is surmised that the central bank may not necessarily plump for continuity by way of an “insider”.

No other bank in the country has almost its entire top brass so closely associated with its helmsman throughout the larger part of their careers. And it was always speculated that it is not certain if the team will hold together in case one among them was to step into Sobti’s shoes.

This concern was flagged in 2014 by analysts when Sobti’s tenure was extended by a year (the retirement age for the heads of private banks was 65 then). A year’s extension was given as then in-the-works P J Nayak Committee on governance in banks had initially deliberated on 65 as the age limit for bank CEOs. It was later decided to go by the Companies Act and the limit was extended to 70.

The RBI expects private banks to put in place a succession plan well in advance so that there is adequate time for the identified successor to settle down – be it an internal or external candidate. In the case of both Sobti and Puri, the year gone by has been about whether the central bank would align the age limit for directors in private bank boards to 75 from 70 to bring it in alignment with the Companies Act (2013). It did not budge, and wanted fresh talent to come in.

IndusInd Bank gains 5% after board finalises new MD & CEO to replace Sobti

Shares of IndusInd Bank moved higher by 5.1 per cent to Rs 1,378.55 on the BSE on Friday after the bank announced selection of a potential successor to Ramesh Sobti, the current Managing Director and Chief Executive Officer (MD & CEO). It, however, did not name the successor. Sobti's tenure will end in March 2020, when he turns 70.

“Pursuant to the recommendation of the Nomination and Remuneration Committee, the Board of Directors of the bank, at its meeting held on Thursday, October 30, 2019, has finalised a potential candidate for the position of MD & CEO,". the bank said in a regulatory filing. READ FILING HERE

The bank further added: "As mandated under the extant RBI norms, the bank has submitted an application to the Reserve Bank of India (RBI), seeking approval for the appointment of the new MD & CEO of the bank".

According to a Business Standard report, the three names which are doing rounds for the corner-room are Sumant Kathpalia, the lender’s head of consumer banking, Paul Abraham, the current chief operating officer and Suhail Chander, head of corporate and commercial banking. READ REPORT HERE

In the past five-weeks, the stock of IndusInd Bank has underperformed the market by falling 15 per cent on concerns emerging from the bank’s exposure to a large housing finance company. In comparison, the S&P BSE Sensex was up 3 per cent during the same period till yesterday.

The bank, however, clarified that the exposure is fully/strongly collarteralised with no overdues. The group also maintains equal or higher amounts of unpledged fixed deposits with the bank, it added.

“We believe potential benefits from the Bharat Financial Inclusion merger on loan growth and ROE accretion are well priced in. We believe higher interest rates will exert some pressure on IndusInd Bank’s relatively nascent deposit franchise and loan growth in the CV book. Investors will also need to take a view on the strategy outlook beyond FY21 after Mr. Sobti’s retirement,” brokerge firm JP Morgan said in Q2FY20 result update. The firm has ‘neutral’ rating on IndusInd Bank with a Mar-20 price target of Rs 1,350.

At 11:15 am, IndusInd Bank was the largest gainer among S&P BSE Sensex, with a gain of 4 per cent at Rs 1,363 on the BSE. In comparison, the S&P BSE Sensex was trading 0.04 per cent lower at 40,114 points.

Indusind Bank finalises 'potential successor' to MD & CEO Ramesh Sobti

Indusind Bank on Thursday informed exchanges that it has selected a potential successor to Ramesh Sobti, the current MD and CEO of the bank. However, it did not name the successor.

In a statement, the bank said, "As mandated under the extant RBI norms, the bank has submitted an application to the Reserve Bank of India (RBI), seeking approval for the appointment of the new MD & CEO of the bank".

Three names which are doing rounds for the corner-room are Sumant Kathpalia, the lender’s head of consumer banking, Paul Abraham, the current chief operating officer and Suhail Chander, head of corporate and commercial banking.

Sobti's tenure comes to end in March 2020, when he turns 70. He joined the bank in February 2008. All the three names which are making rounds joined the private lender along with Sobti as a team.

There has been a change in the leadership at three larger private sector banks. Sandeep Bakshi joined ICICI bank in October 2018, Amitabh Chaudhry joined Axis bank in January 2019 and Ravneet Gill became the MD and CEO of Yes bank in March 2019.

IndusInd Bank Q2 net jumps 52% to Rs 1,401 cr; gross NPAs up 2.2%

IndusInd Bank on Thursday reported a jump of 52.2 per cent in consolidated net profit at Rs 1,400.96 crore for September quarter of the ongoing financial year.

The private sector lender had posted a profit of Rs 920.34 crore for July-September period of 2018-19.

Total income during the second quarter of 2019-20 rose to Rs 8,877.53 crore from Rs 6,755.37 crore in the year-ago period.

However, the bank's gross non-performing assets (NPAs) rose to 2.19 per cent of gross advances as on September 30, 2019 from 1.09 per cent by the same period a year ago.

Net NPAs or bad loans were 1.12 per cent, up from 0.48 per cent a year earlier.

The bank's provision for bad loans and contingencies for the September quarter was increased to Rs 737.71 crore, as against Rs 590.27 crore parked aside a year ago.

IndusInd Bank net profit up 38% in June quarter; stock falls over 1%

Private lender IndusInd Bank on Friday reported an 18 per cent jump in its net profit at Rs 1,220 crore in the June quarter (Q1) of the financial year 2019-20 (FY20). In the same quarter in FY19, the bank had reported a net profit of Rs 1,036 crore. On a consolidated basis, the bank has reported a net profit of Rs 1,433 crore, thereby registering a 38.3 per cent growth year-on-year (y-o-y). This is the lender’s first quarterly result after microfinance lender Bharat Financial Inclusion (BFIL) merged with it.

The net interest income (NII) on a standalone basis stood at Rs 2,419 crore in Q1FY20 as opposed to Rs 2,122 crore in the same quarter in FY19, registering a 14 per cent growth. On a consolidated basis, the NII stood at Rs 2,844 crore. The net interest margin (NIM), a measure of profitability of the banks, stood at 4.05 per cent. The NIM in Q1FY19 stood at 3.92 per cent.

The bank saw an increase in its bad debt as net non-performing asset (NPA) in the June quarter was 1.23 per cent as against 0.51 per cent in the preceding financial year. The gross NPA was 2.15 per cent in Q1FY20 as opposed to 1.15 per cent in Q1FY19. The total advances of the bank registered a 26 per cent growth with total loans amounting to Rs 1.89 trillion in Q1FY20 as opposed to Rs 1.5 trillion in Q1FY19.

Interestingly, although the auto sector is going through a slowdown, the vehicle loans portfolio of the bank has shown an impressive growth of 28 per cent in the quarter with total loans outstanding at Rs 55,046 crore. The bank has made provisions to the tune of Rs 431 crore in Q1FY20. 

On DHFL, Romesh Sobti, managing director & CEO of IndusInd bank, said, “IndusInd Bank’s exposure to accounts, which were speculated as being stressed, was 1.9 per cent and that book has fallen to 1.67 per cent. So, there have been further repayments. Also we have very strong security on these assets and we don’t have any overdues. And, all the accounts are standard.”

On whether the bank is still lending to the stressed NBFC sector, Sobti said, “We have not downed the shutters at all. It’s a question of your becoming more sensitive to who is strong in the sector and I think it’s the strong ones in both NBFC and real estate sector are getting finance from banks.”

The overall capital adequacy increased to 14.90 per cent as against 14.16 per cent in March, courtesy the inclusion of Bharat Financial’s base.

IndusInd Bank closed 1.98 per cent lower at Rs 1,510.35 on the BSE on Friday. The bank said there are only 48 accounts in the SMA1 and SMA2 category and while 0.18 per cent of the bank loans are under SMA 1, 0.17 per cent are under SMA 2. SMA1 accounts are those where principal or interest payment is not overdue for a period of more than 30 days and SMA 2 are accounts whose principal or interest is overdue between 31 and 60 days.