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.