Key highlights from IndusInd Bank Ltd (INDUSINDBK) Q2 FY23 Earnings Concall
Management Update:
- [00:02:03] INDUSINDBK said that its vehicle business recorded the highest ever disbursement of INR 10,660 crores in 2Q23.
- [00:03:45] The bank added 55 branches, along with 2,700 employees in the bank and additional 3,650 employees in the vehicles and microfinance distribution during the year.
- [00:25:23] INDUSINDBK stated its operating profit margins are expected to be stable, considering the near-term pressures from treasury and investment in franchise, compensated by revenue building up from retail disbursements and retail fees. Consequently, ROA and ROE is expected to expand as earnings scale up.
Q&A Highlights:
- [00:26:38] Kunal Shah from ICICI Securities asked about the drivers of increased corporate yield. Sumant Kathpalia CEO replied that corporate banking yields are up 40 bp due to the book linked to the external benchmark rate getting re-priced in 2Q23. And also it was driven by INDUSINDBK’s focus on the small and the mid corporates getting the bank a better yield.
- [00:26:55] Kunal Shah from ICICI Securities also enquired about the momentum in consumer banking yield that’s steady QonQ despite lower slippages. Sumant Kathpalia CEO answered that on the retail side it takes time for yield to increase. INDUSINDBK believes the yields should go up going forward. Microfinance already had a 5 bp yield increase, while the CFD is almost static on the yield.
- [00:29:00] Kunal Shah from ICICI Securities asked about spike in CA and run down in SA, if CA the momentum is expected to continue going forward. Sumant Kathpalia CEO replied that CASA should remain range bound between 40-43%. INDUSINDBK added that it expects CASA to come back to 41% and 43%.
- [00:31:46] Nitin Aggarwal from Motilal Oswal enquired that by when does the company expects the slippages to normalize completely. Sumant Kathpalia CEO said that slippages are getting normalized. And the guidance is on E&R and not A&R. INDUSINDBK added that its credit cost will be around INR4,200-4,400 crores.
- [00:39:45] Rahul Jain from Goldman Sachs enquired about the logic behind growing the large corporate book on loan book growth and the unsecured PL and credit cards. Sumant Kathpalia CEO replied that the company has not grown the Bharat Financial book. INDUSINDBK is well within the unsecured cap of the regulator. On corporate book, INDUSINDBK got into new relationships and got some good deals.
- [00:41:16] Rahul Jain from Goldman Sachs asked about the duration of the corporate book. Sumant Kathpalia CEO answered that 70% is working capital, 30% is term loan, but all these term loans are less than 5-6 years.
- [00:41:40] Rahul Jain of Goldman Sachs enquired if the bank has changed its savings deposit rates. Sumant Kathpalia CEO clarified that it was changed effective Oct. 1. The rates are now at 4% for less than INR100,000; INR100,000-1,000,000 remain at 5%; and INR1,000,000 to INR100 crore remain at 6%.
- [00:44:30] Abhishek Murarka with HSBC asked about the yields on large corporate, midcorporate and small corporate segment individually. Sumant Kathpalia CEO answered that it cannot be disclosed but the yields in the large corporates have moved the lowest and the yields in the SME and the small corporates have moved the highest.
- [00:46:45] Abhishek Murarka with HSBC enquired about the revolver mix in the credit card book. Sumant Kathpalia CEO replied that the bank is still struggling at 27-29%. But the EMI book is around 25% of the book currently. Of the INR7,000 crore book, INR1,400-1,500 crore will be the EMI book.
- [00:48:50] Sameer Bhise of JM Financial enquired about fee as a proportion of assets inching up and if it’s expected to go back to above 2% as it was earlier. Sumant Kathpalia CEO said that the bank has always stated fees in asset ratio should be between 1.6% to 1.9%. Overall, INDUSINDBK is guiding the fees between 1.8-2.1%.
- [00:52:19] Mahrukh Adajania of Nuvama Wealth asked that on MFI, why the book has grown only 1% QoQ. Sumant Kathpalia CEO answered it’s due to the reorganization and the runoff factor. With this book INDUSINDBK has an INR8,600 crore runoff on a INR9,400 crore book.
- [00:53:29] Mahrukh Adajania of Nuvama Wealth asked about the longer term outlook on demand beyond 3Q23 in terms of loans. Sumant Kathpalia CEO replied that as long as public capex pick up, the demand for loans will pick up. That demand will come from the SME, MSME and the midmarket corporate side. INDUSINDBK expects to hit the 20% range in FY23.