Indusind Bank Ltd Q3 FY24 Earnings Conference Call Insights

Key highlights from Indusind Bank Ltd (INDUSINDBK) Q3 FY24 Earnings Concall

• Loan Growth Momentum
  • The bank saw robust loan growth momentum across retail segments, with overall loan growth at 20% YonY.
  • Retail loan growth was 24% YonY, driven by healthy growth in vehicles, microfinance, and consumer loans.
  • Vehicle loan growth remained healthy at 20% YonY and 5% QonQ, with highest ever disbursements this quarter.
• Strong Deposit Growth
  • Retail deposit growth gained pace this quarter, with one of the strongest sequential improvements in retail deposit share in LCR.
  • Retail deposits grew 5% QoQ despite challenging liquidity environment.
  • Increase in cost of deposits was moderate at 9bps QoQ.
  • Saw good progress in new liability initiatives like affluent banking and NRI deposits.
• Mixed Asset Quality Trends
  • Gross and net NPA ratios remained steady QonQ at 1.92% and 0.7% respectively.
  • However, gross slippages were higher than expected at INR1765 crores.
  • The vehicle finance slippages saw some sequential increase but have already started normalizing in January.
• Digital Banking Momentum
  • The digital banking platform INDIE saw strong traction, acquiring over 0.8 million customers and seeing 4 million transactions per month within a short span post launch.
  • Engagement on INDIE is increasing with users doing 35-40 transactions per month; product suite is being expanded.
  • On mobile banking, monthly active users increased 15% YoY. Merchant app users doubled YoY.
  • Over 50% of savings accounts and 40% of term deposits now acquired digitally in DIY manner.
• Moderating Asset Quality Concerns
  • Gross and net NPA levels remained steady QoQ at 1.92% and 0.7% respectively.
  • Vehicle finance slippages were temporarily higher but have already started normalizing from January onwards.
  • Restructured book reduced QoQ in vehicle finance and microfinance segments.
  • Corporate segment saw improved granularity, rating upgrades, and lower slippages annualized at 25bps versus 45bps last year.
• Asset Quality Outlook
  • The bank expects gross slippages to normalize back to INR1100-1200 cr range in upcoming quarters.
  • Corporate slippages should moderate going forward with one-off stress accounts already recognized.
  • Other retail slippages higher in Q3 due to some one-offs in agri, merchant acquiring, but expected to steady.
  • MFI slippages should also moderate in upcoming quarters with portfolio quality remaining steady.
• Margin Trajectory
  • The bank expects to maintain NIMs steady between 4.2-4.3% over next few quarters, in line with past trend.
  • Lending margins are linked to external benchmarks so limited room for expansion unless risk profile deterioration.
  • As funding cost pressures ease with deposit rate hikes moderating, lending rates also unlikely to see material increases.
  • Overall margin outlook remains stable given balance sheet mix and as cost of funds stabilizes.
• Vehicle Loan Growth Outlook
  • The bank has diversified its vehicle loan portfolio across categories, reducing dependence on any one segment.
  • MHCV and tractor demand is dull currently, but growth expected from used CVs.
  • Targeting vehicle loan disbursements of INR14,000 cr in Q4, similar to Q3 levels.
• Capital and Growth Outlook
  • Currently comfortable on capital front with CET1 at 16%.
  • Expect capital raise to happen only when CET1 approaches 14%, likely in mid FY25.
  • Internal accruals sufficient to fund growth in near term given falling risk weights.
  • No immediate need or hurry for capital raise seen despite strong growth momentum.