Analyst Meet / AGM - Analyst Meet

16-Apr-2015, 09:39
IndusInd Bank conducted an analyst meet on 16 April 2015 to discuss the financial performance for the quarter March 2015 and prospects of the bank. Romesh Sobti - Managing Director and CEO along with his colleagues addressed the call:

Highlights:

• CASA growth has remained above 30% for last eight quarters. Bank has witnessed stickiness in its saving account deposits, despite reduction in the saving rate three quarter ago. Thus, the bank has further reduced saving account rate from 4.5% to 4% for balance up to Rs 1 lakh effective from 01 May 2015.

• Bank has also introduced new slab in the saving account category of Rs 1-10 lakh attracting interest rate of 5%. Bank would offer interest rate of 6% for balances above Rs 10 lakh.

• Bank expects to sustain CASA growth, despite the latest cut in the SA rate. However, the bank would normalize the saving account rate in the next few years.

• The cost of saving account deposits has declined below 6%, while bank expects the further decline in the cost of saving deposits.

• Net interest income of the bank increased 18%, while non-interest income of the bank continued to grow at strong pace of 26% with core fee income rising 29% ahead of loan growth. Thus, the non-interest income share in net total income was significant at 42% in Q4FY 2015 rising from 40% in Q4FY2014.

• Bank continues to focus on strong branch network expansion, while plans to double branch network to 1200 branches in three years to FY2017 with current branch count at 801 branches at end March 2015.

• As per the bank, the branch network expansion would help in contributing to the CASA and fee income growth.

• Bank has strong customer acquisition rate at 65000 new customer addition per month. Bank is on track to double customer base in three years to FY2017.

• Bank has exhibited improvement in asset quality with gross non-performing assets (GNPA) declining to 0.81% at end March 2015 from 1.05% a quarter and 1.12% a year ago. Net NPA also eased 0.31% at end March 2015 from 0.32% a quarter ago and 0.33% a year ago.

• In Q3FY2015, bank witnessed fresh slippages of Rs 449 crore, while the deductions to NPAs were higher at Rs 559 crone helping to reduce GNPAs.

• Bank sold four corporate accounts and few retail assets with the gross value of Rs 415 crore to the asset reconstruction companies (ARC) in Q4FY2015 for securities receipts of Rs 60 crore mainly contributing to the NPA deduction.

• Among these four accounts, one corporate NPA account was identified as potential fraud account by RBI, while bank was sensing stress in three other corporate accounts and downgraded them to NPA category, finally selling to the ARCs.

• The net value of the ARCs asset sale was Rs 315 crore, net of provisions of Rs 100 crore. Bank has received securities receipts of Rs 60 crore against the ARCs sales, while bank would be amortizing the losses on account of ARC sales (of Rs 256 crore) at Rs 32 crore per quarter for two years starting Q4FY2015, in line with RBI guidelines.

• The amortization amounts to 10-12 bps of annual credit cost for next two years.

• Bank has utilized floating provisions of Rs 50 crore for making up for losses on ARCs asset sale, in line with the RBI guidelines. Thus, the provision coverage ratio of the bank declined to 62.6% at end March 2015 from 70% at end December 2014.

• Bank holds securities receipts against NPA account sales at Rs 160 crore and other at Rs 60 crore at end March 2015.

• Bank would be using extra ordinary gains to make floating provisions.

• The Tier I capital ratio of the bank stands at 11.22% ay end March 2015. As per the bank, the capital raising would be triggered by the Tier I capital ratio touching a threshold of 10.5%.

• Net interest margin was 3.68% during January-March quarter against 3.67% in previous quarter.

• Restructured advance book of the bank was flat at Rs 367 crore at end March 2015.

• Bank has acquired RBS' diamond and jewelry financing business, which is very qualitative and margin accretive business. The acquired loan book has a size of approximately Rs 4500 crore adding the own loan book of Rs 1500 crore in the segment.

• The asset reconstruction business of the bank is progressing and first buy is in the pipeline.

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