IndusInd Bank Ltd Q4 FY23 Earnings Conference Call Insights

Key highlights from IndusInd Bank Ltd (INDUSINDBK) Q4 FY23 Earnings Concall

Management Update:

• [00:02:32] INDUJSINDBK said overall deposit growth was 15% YonY and 3% QonQ, while loan growth was 21% YonY and 6% QonQ. After 11 quarters, all domains and businesses are now showing healthy growth.

• [00:05:21] The company announce that its quarterly net profit exceeded INR2,000 crores for the first time in its history, with healthy and stable key ratios.

Q&A Highlights:

• [00:45:38] An analyst asked how can the bank increase the quarterly deposit growth rate from 3% to match the 5% growth rate of loans, in order to reduce the gap between deposit and loan growth. Sumant Kathpalia Country Head said IndusInd has slowed down system growth on liabilities to 9-9.5%, and will focus on increasing retail growth higher than asset growth.

• [00:46:01] An analyst enquired if there a front-loading of branch openings this year with 222 branches opened this quarter and a target of 3,750 branches mentioned for the next planning cycle. Sumant Kathpalia Country Head said the bank will expand its branch strategy to 23 cities, but not front-load them. Instead, the bank will focus on a digital strategy for client acquisition with a differentiated offering in both branches and digital sides of the plan.

• [00:46:23] An analyst asked about a like-to-like comparison of the reduction in SA deposits this quarter, factoring in the impact of the bulky SA deposit that was allowed to expire. Sumant Kathpalia Country Head said INDUSINDBK has seen a reduction in SA due to customers moving their balances into term deposits and reducing their focus on a large government association account, partly due to agency banking guidelines that allow government treasuries to access funds from budgets. Despite this, the bank still manages granular accounts well so they expect these flows to remain.

• [00:51:41] An analyst enquired about the outstanding non-fund-based exposure that INDUSINDBK carry? Sumant Kathpalia Country Head clarified INR730 crores is the outstanding.

• [00:53:27] An analyst asked about the pricing environment in the vehicle business and whether INDJUSINDBK are gaining market share in the vehicle business amidst steady growth and rising funding costs, or if the competition is focused on interest rates. Sumant Kathpalia Country Head replied that market share of disbursements is 11.5–12% and market share of outstanding is 10.7%.

• [00:54:06] An analyst asked if the bank is competing aggressively from a pricing angle. Sumant Kathpalia Country Head said that INDUSINDBK has increased the pricing in the microfinance segment in the month of February by 150 basis points.

• [00:54:21] An analyst asked about ARC sales and consumer asset sales in 4Q, what’s company’s experience with respect to recovery from the MFI pool and comparing it to the trend of larger ARC sales in the MFI space over the past few quarters. Sumant Kathpalia Country Head answered that INDUSINDBK’s MFI recovery was 8% on the ARC side and 65-70% on the CFD side.

• [00:57:18] An analyst asked what is the median yield difference between the existing 50% fixed rate book and the incremental book, and when will the blended yield start to increase at a faster pace. Sumant Kathpalia said it is difficult to say whether yield will increase as there are multiple dynamics at play. Disbursements have increased, but the longer-term book is being built with MSPV which has a 5-year duration, and microfinance sector has been shrinking for the first 3 quarters of the year.