No exposure to stressed out aviation space: IndusInd Bank

Posted on January 18, 2012. Filed under: Uncategorized |

IndusInd Bank's restructuring story has paid rich dividends to shareholders and once again proved how the management change can turnaround the fortunes of the bank.

Hinduja Group Company reported a net profit of Rs 206 crore in the third quarter of FY12, a growth of 33.8% as compared to Rs 154 crore in the same period last year. Net interest income increased 16% to Rs 421 crore from Rs 363 crore during the same period.

Gross non-performing assets (NPAs) declined at 1.02% against 1.09% in the previous quarter. Net NPAs during the same period too slipped at 0.29% versus 0.31%.

Commenting on the results, Romesh Sobti, managing director and chief executive officer at IndusInd Bank says, “The cost of credit has fallen from 13 basis points to 9 basis points, quarter-on-quarter. No exposure to stressed sectors like aviation was another key takeaway from the boardroom. He also expects banking industry credit growth in the range of 17-18%. The bank welcomes savings rate hike deregulation move. “Our customer base has gone up post savings rate hike”, he added.

Below is the edited transcript of Sobti's interview with CNBC-TV18's Udayan Mukherjee and Sonia Shenoy. Also watch the accompanying video.

Q1: While your numbers were good and received well by the market the only small wrinkle was that your net interest margins have slipped to about 3.25%. Do you see this as a temporary slip and see yourself getting back to 3.5% plus margins very soon?

A: The indicators to margins getting back to 3.5% levels are well embedded in the numbers. Our deposit costs have actually flattened out and going forward we believe that whatever drop we had has bottomed out. We have built a nice fixed rate book on the finance side at a very high rate so we are really looking forward to rates dropping which will led to margins expansion. This is probably the end of the margin compression cycle.

Q2: What kind of a net interest margin (NIM) target could you set out for your bank by the end of this fiscal? What kind of outlook do you have for the next fiscal as well?

A: A long term target is set by the bank which is very ambitious as we have a pretty high yielding book. We probably have the highest gross yields in the industry and half of the book is at a fixed rate on the consumer side. Last year we clocked a high of 3.6% on the margins front and now it has dropped to 3.25%. We want to get back to that level as soon as possible and even beyond it since our fixed rate book is going to hold up for the next two years.

Q3: The concerns on the banking system have revolved largely around the worsening of asset quality. This quarter your asset quality was quite impeccable. Do you see the possibility of slippages as we go into FY13 from the way you are monitoring any of your key industrial accounts?

A: One will see a clear trend in our cost of credit. If you look at it over the last 3-4 quarters and for instance last quarter our cost of credit was 13 basis points and it has now fallen to 9 basis points. NPA's don't happen overnight but you can see it coming 6 months in advance. Our retail book has held up very nicely. I don't think there are going to be any hiccups on this front. The corporate side of the book has been pretty robust in the last 3-4 years. So I would imagine that we would be overall on cost of credit well below the 60 basis points that we were last year and we don't have exposures to the sensitive sectors which are worrying analysts and investors whether it is civil aviation or real estate. The book is very well diversified and we are confident that NPA levels are manageable.

Q4: IndusInd Bank has exposure to the commercial vehicle sector. Are you seeing any increase of delinquencies and subsequently would that put any pressure on your asset quality?

A: The vehicle finance sector is one contrarian sector that one has witnessed over the last 6-9 months and there were dooms day analysis on that that as the market and economy slowed down. The freight rates will fall and delinquencies will increase. If you talk to the manufacturers you will be surprised by the numbers and also freight rates have actually hardened in the last 6 months. Also hardened freight rates really mean is better collections. A very stable delinquency profile is seen but more importantly demand has shifted to the large 4-5 players who have remained stable and has gone away from the small players who were more opportunistic. So both on the demand and delinquency side, this particular portfolio has held up very nicely and you will see the same trend out of the other 3-4 big boys in this business.

Make a Comment

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Liked it here?
Why not try sites on the blogroll...

%d bloggers like this: