The bank, after steadying its performance, will now get into the expansion mode
It’s a continuation of the steady growth story at IndusInd Bank. Results announced for the quarter ended June indicate that its sound performance has been extended. And, while on a sequential basis the bank’s results may seem a small extension, the year-on-year numbers bring out the distinct improvement in operational measures.
For one, the most important and watched for ratio – the provision coverage ratio – has grown from 31 per cent to 70 per cent, as stipulated by the central bank and, therefore, there is little tension for write-offs on this front. In line with the provision coverage, the asset quality, too, has improved, with the net non-performing assets (NNPAs) percentage falling from 1.01 per cent in the June 2009 quarter to 0.38 per cent in the latest June quarter.
Its reliance on lower cost of capital and robust advances have seen net interest income rise 77 per cent from the June 2009 quarter to touch Rs 295.68 crore. Advances grew at a faster rate than deposits over the year. During the period under review, current account and savings account (Casa) – a source of low costs of funds – grew from 20.20 per cent to 24.33 per cent. This allowed the net interest margin to be higher at 3.32 per cent in June, compared to 2.45 per cent in the same period last year. This would allow the bank to remain competitive over the year ahead as well.
However, on a sequential basis, the improvement has been reasonable, to say the least. The Casa in the March quarter was at 23.7 per cent and the net interest margin at 3.2 per cent. The bank would have to improve the Casa number in the times to come, as it is way below the 30 per cent level that most peer banks have. Banks like HDFC Bank and SBI have an even higher Casa level of 35 per cent plus. That gives them the leverage to grow.
However, IndusInd has a smaller scale of operations yet. The bank, after consolidating its books, would now look at growing and is expected to get into the network expansion mode, with 127 branches being added this financial year. With this, there are strong chances that the Casa numbers would improve.
