Analyst Meet / AGM - Analyst Meet

17-Apr-2014, 06:02
IndusInd Bank conducted an analyst meet on 16 April 2014 to discuss the financial performance for the quarter March 2014 and prospects of the bank. Romesh Sobti - Managing Director and CEO along with his colleagues addressed the call:

Highlights:

• Bank reduced the cost of funds during quarter ended March 2014 with sufficient liquidity in the system, which helped bank to improve NIMs despite change in advance book mix in favour of corporate book.

• The strong inflows in the current account deposits also helped bank to reduce cost of funds and support margin improvement.

• The weighted average cost of the saving deposits with the bank stands at 6.6%.

• The provisions bill of the bank was mainly inflated due to provisions for mark-to-market (MTM) losses in the investment portfolio. Bank has made MTM provision of Rs 35 crore in the quarter ended March 2014 and Rs 88 crore in FY2014.

• Bank has maintained the asset quality stable, helping to contain the credit cost at 48 bps in FY2014 against target of 60 bps. Bank has again targeted the credit cost of 60 bps for FY2015, while expects it to be actually lower than the targeted level.

• Bank has sold Rs 35 crore of bad loans to Asset Reconstruction Company (ARC) in Q4FY2014 in addition to Rs 25 crore in Q3FY2014 and Rs 24 crore in Q2FY2014.

• The Securities Receipts (SRs) book of the bank stood at Rs 138 crore at end March 2014, which is expected to decline to Rs 70-75 crore over next six months with more resolutions expected during the period.

• Bank restructured two accounts in the quarter ended March 2014. The restructured advance book has remained nearly steady at 0.33% of advances at end March 2014.

• The retail book share in the overall advances book declined to 45% during FY2014, mainly due to stress in the commercial vehicle (CV) segment. However, bank expects the CV book stress bottoming out and CV business to pick-up over next six months.

• Bank has improved its market share in CV segment, as many players exited the segment during slowdown. As per the bank, currently only eight players hold about 70% market share compared to 40% share two years ago.

• Bank continues to be in favour of 50:50 mix for corporate: retail book in the overall advances book.

• Bank has slowed down deposits growth, as it stepped up borrowings from various refinance windows. However, bank expects the deposits growth to pick up going forward.

• Bank remains well capitalized, which is sufficient for next two years of growth. However, the decline in CRAR ratio during Q4FY2014 was mainly caused by the year ending application of operational risk in the total risk weights.

• On regulatory decisions, bank expects RBI decision to limit the banks borrowing at fixed repo window and hike in borrowing limit at term repo window would cause spike in borrowing cost for banks borrowing at LAF window.

• As per the bank, RBI has announced the decision to provide further banking licenses on tap, but there will be good amount of time interval between the current licenses issued on 02 April 2014 and next ones to be issued.

Planning Cycle-III (FY2015-FY2017)

Bank has embarked on planning cycle III from 01 April 2014, under which it has planned and targeted various goals to be achieved in three-year period by March 2017 as follows:

• As per the bank, the PC-III would be more of the same (as PC-II and PC-I), while it would focus on adding more interest income and fee income boosters.

• Bank would focus on dominating certain loan segments, while improving its share and specialization in that particular segments.

• Bank proposes to emerge number one in each segment of vehicle finance. Bank is planning to enter the tractor financing business shortly.

• Bank would add six new home markets (a city with 5% share in overall branches in that location) during PC-III period raising the home markets count to 12 from existing six home markets.

• Bank proposes to double the branches count to 1200 branches, while doubling the customer base to 10 million by March 2014.

• At end March 2017, about 400 rural branches would be part of banks total branch network.

• Bank would enter asset reconstruction business in tie-up with ARC in two months.

• Bank proposes to maintain the advances growth in the range of 25-30%.

• CASA ratio is proposed to be improved to 40%

• Fee income growth is targeted to be above the loans growth, with the record of accomplishment for nearly last 24 quarters.

• Bank expects the ROE of 20%, ROA of 2% and NIM of 4% to be realistic to achieve.

• Bank has targeted the expense ratio of 43-44%, which is idealistic with the focus on balance in retail and corporate book. As per the bank, it would have targeted lower expense ratio of below 40%, if the focus was corporate banking.

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