IndusInd Bank Q4 FY24 results

Sector Outlook: Positive

Net profit beats estimates and consistent return metrics

In the fourth quarter of the fiscal year 2024, IndusInd Bank reported a Net Interest Income of Rs. 5,376 crores, showing a 15% increase from last year, which matched market predictions. Its operating profit before provisions was Rs. 4,027 crores, slightly up from the previous quarter and 7.3% higher than last year. The bank reduced its provisions for bad loans to Rs. 899 crores, helping it achieve a net profit of Rs. 2,347 crores, surpassing expectations by about Rs. 197 crores. The Net Interest Margin, a key profitability indicator, stayed relatively steady, slightly decreasing compared to last quarter and last year. The bank’s efficiency ratio worsened slightly, indicating higher costs. Its bad loan ratios remained stable, showing effective management of loan quality. The bank’s capital levels dipped slightly but remained robust. Deposits and loans both grew nicely, driven by strong demand in consumer and corporate lending. The bank also announced a dividend of Rs. 16.5 per share.

Key Concall Highlights

  1. The bank achieved an 18% loan growth this year, with all business units showing improved asset quality. The total balance sheet exceeded 5 lakh crores.
  2. It has a diverse loan portfolio, now more focused on retail lending, which includes strong growth in retail assets and the MSME sector, particularly in loans under Rs. 2 crores.
  3. The bank plans to accelerate growth in other retail assets as a key strategic focus.
  4. In the past year, the bank opened 378 new branches, including 256 in the last quarter.
  5. Digital initiatives were successful, with 2 million new clients added online and Rs. 1,000 crores in personal loans disbursed through a digital-first approach.
  6. Financial indicators like loan yield and cost of funds remained stable, supporting the shift towards more retail lending.
  7. The bank successfully received a repayment of Rs. 990 crores from a previously stressed telecom operator.
  8. It plans to maintain additional financial buffers for microfinance and housing loans.
  9. Key strategies for FY25 include focusing on increasing retail deposits, aligning loan and deposit growth, and enhancing loan diversity and granularity.
  10. The bank aims to outperform industry growth, targeting 18-22% loan growth and a return on assets (ROA) of 1.8-2.2%.
  11. Net Interest Margins (NIMs) are expected to stay between 4.2-4.3%.
  12. Liquidity management remains a priority, with a focus on matching asset growth without worrying about cash reserves and account savings.
  13. The bank believes it has sufficient reserves for any market changes and expects higher market volatility.
  14. Employee retention is a priority amid industry-wide challenges, with attrition rates expected to stabilise at 28-32% as the bank expands its operations.

Valuation and Outlook

IndusInd Bank had a strong performance in the fourth quarter of FY24, maintaining stable net interest margins (NIMs) while other banks struggled. The bank saw significant deposit growth by targeting specific market segments, although the cost of these deposits rose slightly due to an increase in term deposits. The bank also reported strong loan disbursements, particularly in vehicle financing and microfinance, both showing substantial growth and focus on detailed client relationships. The bank’s loan services for small and medium-sized businesses and retail banking sectors also grew robustly. Its asset quality remained solid throughout the quarter. Looking ahead, IndusInd Bank is well-placed compared to its competitors, likely maintaining its strong performance. The bank plans to focus on increasing retail deposits, aligning loan growth with deposit rates, and enhancing its loan portfolio diversity for the 2025 fiscal year, indicating promising growth for the future.

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