Private sector lenders IndusInd Bank reported on Monday a net profit of some 301.84 crore for the three months up to March, down 16 percent year-on-year (y-o-y) due to increased provisions.
The overall provisions of the bank rose 56 percent y-o-y in the March quarter to ~2,440 crore. Its earnings were smaller than a Bloomberg poll of 13 analysts estimated at ~412.8 crore.
The net interest income or the difference between interest received and expended amounted to approximately 3,231,19 crore, up 44.74 percent from last year’s same period. Net interest margin (NIM) of IndusInd Bank, a indicator of its profitability, was 4.25 per cent in Q4FY20. It is10 basis points (bps) higher than Q3 FY20 and 66 bps higher than Q4 of the previous fiscal year.
Covid-19 Changed Everything
According to Live Mint, Sumant Kathpalia, the newly named chief executive, said the bank has done a Covid-19 situation analysis and a full portfolio analysis on the corporate and retail side of its sector.
“We took on various situations. We’ve taken for a mild-to-moderate scenario that 50 percent of the country opens up about mid-May or the third week of May. Then, the 25 percent balance opens up between the first and second weeks of June. After that, the 25 percent balance in the first week of July, “Kathpalia said.
In such a case, the bank would see no rise of more than 80 bps in its gross non-performing assets (NPA). And also, 50 bps in the cost of credit since.
The gross bad loan ratio of the IndusInd, or its bad loans expressed as a percentage of total loans. It increased to 2.45 per cent in Q4FY20 on a y-o-y basis 35 bps. Nonetheless, due to an increase in provisions, the net bad loan ratio was down 30 bps y-o-y. In March 2020, the service coverage ratio (PCR) rose from 43.04 per cent in March 2019 to 63.34 per cent.