Fri Oct 25 07:25:06 UTC 2024: IndusInd Bank recently reported a significant decline in its Q2 FY25 consolidated net profit, which fell by 40% year-on-year and 39% quarter-on-quarter to ₹1,331 crore. This downturn is attributed to higher provisions for bad loans, particularly in the unsecured credit segment. As a result, the bank’s shares plummeted over 15% in early trading the following day.
Key points from the report include:
– The bank experienced weak revenue and pre-provisioning operating profit (PPOP) growth, largely pressured by sluggish demand in the microfinance (MFI) and vehicle financing segments.
– An increase in non-performing assets (NPAs) was noted, with the gross NPAs rising to 2.11% and net NPAs to 0.64%.
– Management indicated potential for a worsening asset quality, especially in the MFI segment, and revised down loan growth expectations for the year to a range of 13% to 15%.
– The bank’s net interest margins (NIM) contracted by 15 basis points quarter-on-quarter due, primarily, to reduced disbursements in high-yielding products.
– Provisions for bad loans surged 87% year-on-year, amounting to ₹1,820 crore.
– Analysts have cut earnings estimates by 29% and 20% for FY25 and FY26 respectively, forecasting a moderation in return on assets (RoA) and return on equity (RoE).
– Despite the current challenges, some analysts maintain a “BUY” rating on the stock, projecting potential recovery in growth and asset quality by FY26 with a revised target price.
Overall, the bank is navigating through a challenging quarter marked by elevated credit costs and pressure on profitability, but anticipates improvement in the latter half of the fiscal year.
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