Higher provisioning dents IndusInd profit

IndusInd Bank's quarterly net profit fell by 36.12 per cent at Rs 27.37 crore for the quarter ended December 31, 2005 as against Rs 42.85 per cent in the corresponding quarter of previous year.

Even the operating profit of the bank declined by a whopping 48.88 per cent at Rs 44.50 crore as against Rs 87.06 crore in the comparable period, a year earlier.

"Net profit has declined this quarter because of higher provisions on standard assets, which was mandated by the Reserve Bank of India," said the bank's managing director and CEO, Bhaskar Ghose.

RBI, in its mid-term review of annual credit and monetary policy, had raised the provisioning of standard assets to 40 basis points from 25 basis points.

The operating profit declined because of a drop in net interest margin (NIM) to 1.95 per cent (from 2.71 per cent) coupled with increased operating expenses.

"Our operating expenses shot up because we recruited 700 employees in anticipation of opening 70 more branches subject to regulatory approval," said Ghose.

The bank's net interest income fell by 26.94 per cent in the reporting quarter at Rs 73.92 crore for the quarter under review compared to Rs 101.18 crore. The bank's NIM fell to 1.95 per cent because cost of deposits inched up to 5.84 per cent to 5.38 per cent, Ghose added.

Deposits have grown by 25.01 per cent to Rs 13,780 crore (from Rs 11,023 crore). Retail deposits grew by 44 per cent to Rs 5,062 crore for the quarter under review (from Rs 3,505 crore).

The bank's advances grew by 24.71 to Rs 9,196 crore. Yield on advances has gone down to 9.67 per cent from 11.66 per cent, partially because of our strategic decision to stop further securitisation of receivables, Ghose added.

The bank's net NPAs stood at 2.45 per cent for the reporting quarter.