ICRA has reaffirmed the A1+ rating to the Certificates of Deposit Programme of IndusInd Bank Ltd (IBL) indicating highest credit quality in the short term. ICRA has also reaffirmed the LA+ rating and LA rating respectively to the outstanding Lower Tier II Bond programme and Upper Tier II bonds of IndusInd Bank Ltd. The one notch lower rating assigned to the Upper Tier II bonds as compared with that assigned to lower Tier II bonds reflects the specific features of these instruments.
According to ICRA, IndusInd Bank’s ratings are supported by its strong presence in the retail finance space and steady improvement in interest margins and fee income levels. The ratings also favourably factor in the experience and ability of the new management team that has joined the Bank earlier in the year. The rating also factors in the benefits of the new organizational structure focused on improving profitability and deepening client relationships.
The corporate credit portfolio of IndusInd Bank Ltd is well diversified and it has also managed to keep the delinquencies in the vehicle finance portfolio under control. In Q3 of the current fiscal, the Bank reached a settlement on one large NPA account, as a result of which, the asset quality indicators are expected to be significantly better in the current fiscal. With the churning of the vehicle finance portfolio to high yielding assets, the Bank stands to gain on NIM under the current declining interest rate scenario.
The credit-deposit ratio improved to 67.2% as of March 2008 and further to 72.1% as on September 2008 compared to 62.8% as of March 2007.
The focus of the new management towards reducing dependence on bulk deposits would improve the deposits profile. CASA growth improved to 17.0% over during the half year ended September 2008.
The contribution of IndusInd Bank’s Fee Income to its overall revenue compares favorably with most of its peers and is expected to remain at these levels going forward. Notably, there has been a shift in the profile of non-interest income in fiscal 2008 and current fiscal towards core fee earnings (such as commission, profit from exchange transaction, distribution income etc.) Turnover in the forex markets grew at a rapid pace, fuelling forex fee income. The new management’s focus on cross selling of fee products to existing customers is further expected to enhance fee income.
IndusInd Bank’s capital adequacy improved to 12.5% as on September 2008 from 11.9% as on March 2008 on the back of the Rs 2.22 billion GDR issue in June 2008. Pursuant to the capital raised in June 2008, the Bank has sufficient cushion to raise debt capital to meet its business plans over the medium term. Capital adequacy under Basel II will improve further due to significant retail credit portfolio and better rated corporate advances
About IndusInd Bank
IndusInd Bank Limited, with its corporate office in Mumbai, is one of the new generation private sector banks operating in India. It commenced operations in 1994 and had a net worth of Rs. 16.11 billion as on September 30, 2008 (Rs. 11.09 billion as on March 31, 2008). As on September 30, 2008, it has 180 branches spread over 147 geographical locations and 28 States and Union territories across the country. It also has 356 ATMs and representative offices in London and Dubai. The Bank has recently received licenses from RBI for opening 30 new branches, 50 off-site ATMs and 6 mobile ATMs. It had an asset base of Rs. 249.83 billion as on September 30, 2008.
During the year ended March 31, 2008, IndusInd Bank reported net profit of Rs. 0.75 billion on a total income of Rs. 21.99 billion as compared with Rs. 0.68 billion and Rs. 17.93 billion, respectively, during the previous year.
During the half year ended September 30, 2008, the Bank reported net profits of Rs. 0.50 billion on a total income of Rs. 12.2 billion as compared to Rs. 0.4 billion and Rs. 10.1 billion respectively in the corresponding previous period.
