Tag: IndusInd Bank

IndusInd Bank to raise climate financing to 3.5% in 2 years, BFSI News, ET BFSI

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NEW DELHI: Private sector IndusInd Bank on Saturday said it will reduce carbon emissions to 50 per cent in next four years and raise climate financing to 3.5 per cent in two years.

The bank will be increasing the allocation of capital towards climate finance to 3.5 per cent of its loan book over the next two years, which is currently at 2.7 per cent, IndusInd Bank said on the occasion of the World Environment Day.

The bank has also committed to reducing its specific carbon emission by 50 per cent over the next four years, it said in a release.

The bank promoted by the Hinduja group also said it has made it to the Carbon Disclosure Project (CDP) list for the sixth consecutive time, making it the only Indian bank to get featured in this prestigious list.

Among others, IndusInd Bank Managing Director and CEO Sumant Kathpalia said the bank is transforming all its pioneer branches /lobbies into green and plastic free zones and getting them LEED certified.

The bank is also supporting tree plantation drive under which 50,000 trees will be planted in cities with high pollution index.

It has also launched an employee awareness drive, helped install solar solutions of 675 KW capacity which has reduced carbon emission worth 8,278 tonnes and created water harvesting capacity of about 70 million cubic meters and also restored 15 lakes and two drainage systems.

Roopa Satish, Head – Corporate & Investment Banking, CSR & Sustainable Banking, IndusInd Bank said, “The Bank is determined to take a leadership position in mitigating the impact of climate change through committing long term targets and deploying a strategy to invest in clean energy and energy efficient projects.”

She said IndusInd Bank is also one among 21 Indian companies and the only Indian bank to be featured in the Dow Jones Sustainability Index Yearbook 2021.



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IndusInd Bank MD plans to sell some shares held via previous ESOP, BFSI News, ET BFSI

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The MD and CEO of IndusInd Bank, Sumant Kathpalia plans to sell some of his share in the bank through previous Employee Stock Options (ESOP).

In a regulatory filing the bank said that he will sell the shares to repay loans taken to exercise earlier vested ESOPS.”Sumant Kathpalia, Managing Director & CEO of the Bank, plans to sell some shares of IndusInd Bank Limited held by him through exercise of previous Employee Stock Options (ESOPs), principally to exercise upcoming ESOP vesting and to repay loans taken to exercise earlier vested ESOPs,” it said.

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How IndusInd Bank is ready for loan growth amid Covid onslaught, BFSI News, ET BFSI

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IndusInd Bank reported a stable fourth quarter with an in-line performance, making analysts bullish on it despite the Covid pandemic.

While the bank reported year-on-year net profit growth of 190% on low base effect, its deposits grew 7% quarter on quarter, while loan growth is seeing a revival.

Deposits

Its total deposits grew by 26.8% y-o-y and 7.1% q-o-q. The 10.5% q-o-q growth in current and savings account (Casa) has helped the bank to increase its Casa ratio to 42%, bringing down its costs of funds.

While IndusInd Bank reported muted loan growth of 2.8% y-o-y and 2.6% q-o-q during the fourth quarter, the management is now focused on the loan recovery and its collection efficiency has improved from 97% to 98% q-o-q.

Its high capital adequacy ratio (CAR), its Tier 1 CAR is placed now at 16.9%, could easily support the growth in several years. With a 2.6% q-o-q increase in loan book, loan growth has made a small come back in the fourth quarter and analysts believe that IndusInd will be able to deliver around 10% loan growth in 2021-22. IndusInd also plans to expand its geographic reach by opening around 250 branches each in 2021-22 and 2022-23.

Asset quality

On the asset quality front, the Gross non-performing asset ratio improved sequentially and stood at 2.67%/0.69%, with the provision coverage ratio improving to 75% from 43% in March 2019. In addition to this, the bank holds a COVID-related provision buffer at 75 bp of loans. The restructured book stood at 2% of loans (slightly higher than the guided 1.8%), largely from the Vehicle portfolio.

IndusInd follows a conservative provisioning policy which has resulted in its provision coverage ratio (PCR) improving to 74% now from just 43% in March 20219. It has made 100% provisions for unsecured retail loans and MFI loans.

With large provisions to the tune of 3.3% of its total advances, it should be able to navigate the current turbulent times with this balance sheet cushion.

Business momentum

IndusInd reported a net profit of Rs 930 crore, in line with estimates, aided by an improvement in its core operating performance.

Net interest income grew 9% YoY to Rs 3,530 crore as the margins waere broadly stable at 4.13%. Fee income picked up sequentially and grew ~9%, while opex was broadly flat YoY.

Advances growth picked up sequentially to 2.6%, aided by improving demand. Among retail segments, the MFI/Tractor portfolio showed robust traction, while the credit card portfolio showed a declining trend. The wholesale portfolio grew 3% quarter on quarter while the retail to wholesale mix stood at 57:43.

Deposit traction remains strong at 7% QoQ to Rs 2.6 lakh crore.



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Private banks cut unsecured loans, stay safe in Covid storm, BFSI News, ET BFSI

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Wondering why pesky calls offering personal loans have reduced during the last few months?

After the pandemic started, most private sector banks have scaled down their unsecured loan business and relied on home and government-guaranteed loans.

Lenders are going slow once again on micro nance loans, credit cards and personal loans, as they see these unsecured loans to have become riskier amid the second wave of the pandemic.

The prudence has helped them in reducing the risk of defaults during the second wave.

The banks now cater to small business loans that are guarantee by the government under the Emergency Credit Line Guarantee Scheme. They have also focused on home loans that are secured by a mortgage. SBI last year hit Rs 5 lakh crore home loans target and set a stiff target for the segment.

Portfolio shrinks

Kotak Mahindra has reduced its unsecured portfolio to 5.8% of the total assets in FY21 from 7.5% earlier.

While ICICI bank grew its home loans by 21% year on year, its loan book grew in single digits. The bank also brought down its loan against shares and other securities by 8% and shrunk its two-wheeler loans by 4%.

Axis Bank has cut its share of unsecured loans to small businesses to 11% in FY21 from 15% in FY20.The bank has made 100% provisions for restructured unsecured loans.

IndusInd Bank too remains cautious on unsecured lending and limit the segment to 5% of total loans and go slow on three-wheeler loans.

Cautious stance

Personal loans in the banking industry grew at a slower pace of 10.2 per cent in the last fiscal year ended March 31, compared with more than 15 per cent the preceding year. Consumer durable loans were the worst hit and contracted by more than 21 per cent between March 2020 and 2021 against 47.6 per cent growth in the prior year.

Credit card outstanding totalled Rs 1.16 lakh crore at the end of March, a 7.8 per cent increase in a year against more than 22.5 per cent growth in fiscal 2020.

The growth in home and government-guaranteed loans has helped lenders expand the balance sheet even as they shied away from unsecured loans. By making 100% provisions for unsecured loans, private banks would not have to take a major hit in the first quarter despite the second wave of the pandemic buffeting the economy.



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IndusInd Bank net profit surges 190 per cent in Q4

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Private sector lender IndusInd Bank standalone net profit surged 190.2 per cent in the quarter ended March 31, 2021 to ₹875.95 crore as against ₹301.84 crore in the fourth quarter of 2019-20.

However, for the full fiscal 2020-21, its standalone net profit fell 35.8 per cent to ₹2,836.39 crore from ₹4,417.91 crore in 2019-20. For the quarter ended March 31, 2021, the net interest income increased 9.4 per cent to ₹3,534.61 crore as against ₹3,231.19 crore a year ago. The net interest margin was at 4.13 per cent for the quarter.

Increase in other income

Other income increased marginally to ₹1,780.12 crore for the fourth quarter last fiscal versus ₹1,772 crore in the same period in the previous fiscal. Provisions declined 23.5 per cent in the fourth quarter last fiscal to ₹1,865.69 crore versus ₹2,440.32 crore a year ago. The gross non performing assets stood at ₹5,794.99 crore as on March 31, 2021 or 2.67 per cent of the gross advances as against 2.45 per cent a year ago. The net NPAs stood at 0.69 per cent of the net advances as on March 31, 2021 compared to 0.91 per cent as on March 31, 2020.

The board also recommended a dividend of ₹5 per equity share of face value of ₹10 each for 2020-21, subject to approval of the shareholders at the annual general meeting.

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Net profit soars 190% to Rs 876 cr, beats estimates; firm to pay Rs 5 dividend, BFSI News, ET BFSI

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MUMBAI: IndusInd Bank today reported a 190 per cent year-on-year rise in its net profit for the quarter ended March to Rs 876 crore, which was above analysts’ estimates.

The lender reported a net interest income of Rs 3,534.6 crore for the reported quarter, which was also higher than analysts’ estimates of Rs 3,476 crore.

The lender’s asset quality in the quarter, however, deteriorated on a sequential basis. The bank reported gross non-performing assets ratio of 2.67 per cent as against 1.74 per cent in the previous quarter.

IndusInd Bank’s net non-performing assets ratio stood at 0.69 per cent at the end of the March quarter as against 0.22 per cent in the previous quarter.

The bank said that its board has approved a final dividend of Rs 5 per share.

The lender’s bottomline was boosted by a 23.5 per cent year-on-year fall in provisions and contingencies during the quarter to Rs 1,865 crore.

IndusInd Bank said that it has made provisions of Rs 2,208 crore till March 31 on account of the Covid-19 pandemic and the high uncertainty created by the second wave.

Shares of IndusInd Bank ended 0.5 per cent lower at Rs 934.95 on the National Stock Exchange.



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RBI’s new rule on tenure will promote younger lot at bank, BFSI News, ET BFSI

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The Reserve Bank of India has put a cap on the maximum age of a bank CEO, paving the way for a younger lot to helm banks transitioning into digitalisation.

The Reserve Bank of India has fixed the tenure of MD, CEO and whole-time director (WTD) in a private sector bank at 15 years and prescribed the maximum age of 70 years for such functionaries.

This will lead to a change in succession planning at the banks.

The impact

Uday Kotak, the promoter MD and CEO, got reappointed on January 1, 2021, for three years. His tenure will end on January 1, 2024, and is not eligible for reappointment as he has already completed 15 years as the MD and CEO.

HDFC Bank, ICICI Bank, Axis Bank CEOs have had plenty of time and can be the CEO for more than a decade as they were appointed on the post recently.

IndusInd Bank CEO Sumant Kathpalia took charge last year and can continue at the helm of affairs for more than a decade

Kamakodi, CEO of City Union Bank, will complete his 15-year tenure in May 2026, which will be two years before his retirement.

In the case of Bandhan Bank, if the RBI considers the date of conversion to bank, which is five years ago, then C S Ghosh has a long time ahead.

The upper limit of 15 years for MD and CEOs may increase the scope for a few more years at the helm for banks like DCB, Federal and RBL.

The road ahead

The provision that individual will be eligible for re­appointment as MD and CEO or whole-time director in the same bank after a minimum gap of three years, leaves an opportunity for the promoter-CEO to take the bank helm after a gap of three years

Experts say while the tenure cap benefits new age banks, which need a younger lot to steer them, the bank-promoter CEO enterprise would have an impact.

The new norms will also lead to bigger involvement of independent director and non-executive directors in the bank affairs and help in good governance and vigil. 0

The RBI directives

These directives form part of the instructions issued by the RBI with regard to the chair and meetings of the board, the composition of certain committees of the board, age, tenure and remuneration of directors, and appointment of the WTDs on Monday.

The RBI said it would come out with a Master Direction on Corporate Governance in banks in due course.

“Subject to the statutory approvals required from time to time, the post of the MD & CEO or WTD cannot be held by the same incumbent for more than 15 years.

“Thereafter, the individual will be eligible for re-appointment as MD & CEO or WTD in the same bank, if considered necessary and desirable by the board, after a minimum gap of three years, subject to meeting other conditions,” the RBI said.

It added that during this three-year cooling period, the individual shall not be appointed or associated with the bank or its group entities in any capacity, either directly or indirectly.

With regard to the upper age limit for MD & CEO and WTDs in the private sector banks, the RBI said that no person can continue on such positions beyond the age of 70 years. The banks” boards, however, will be free to prescribe a lower retirement age for the WTDs, including the MD & CEO.

The maximum age limit for chairman and non-executive directors has been fixed at 75 years.



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Banks may skip dividend payments for the second year, BFSI News, ET BFSI

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After HDFC Bank, it may be the turn of other private sector banks including ICICI Bank, IndusInd Bank, Axis Bank and Yes Bank to skip dividends for the second year in a row.

HDFC Bank, the country’s most valuable lender, has already announced its stand that it will skip dividends.

As Covid cases surge and ravage the economy, cash conservation would be the foremost on the agenda of banks, which are likely to see huge defaults.

Dividend payments

Last year the Reserve Bank of India had barred banks from paying dividends for the fiscal year ended March 2020 so that they conserve capital in view of the economic shock caused by the Covid-19 pandemic.

In his address, which included other policy measures, RBI governor Shaktikanta Das said the ban on dividend payment will help banks conserve capital.

Covid woes: Banks may skip dividend payments for the second year

“It is imperative that banks conserve capital to retain their capacity to support the economy and absorb losses in an environment of heightened uncertainty,” Das said.

“It has, therefore, been decided that in view of the Covid-19-related economic shock, scheduled commercial banks and cooperative banks shall not make any further dividend payouts from profits pertaining to the financial year ended March 31, 2020 until further instructions.” Though there is no RBI restriction yet on dividend payments, banks are likely to skip payments this year too to conserve cash.

In respect to dividend payments, Yes Bank, and HDFC Bank are ahead of other banks. Their dividend yields since FY2011 are in the range of 0.65-1.93%. Banks including Axis, IndusInd, ICICI come next in line in rewarding investors.

For HDFC Bank, this is the first time in the last one decade at least that the lender, of its own, did not offer any dividend. Even in FY20, it had offered an interim dividend before the RBI barred banks from announcing dividends.

Acute stress


Given the second Covid wave all over the country, non-performing assets (NPAs) or bad loans of public sector banks (PSBs) could cross 18 per cent if there is deterioration in economic activity due to the pandemic, former RBI deputy governor has H R Khan said.

As per the Financial Stability Report released by the Reserve Bank of India (RBI), the NPAs of the banking sector were projected to surge to 13.5 per cent of advances by September 2021, from 7.5 per cent in September 2020, under the baseline scenario.

The report had warned that if the macroeconomic environment worsens into a severe stress scenario, the NPA ratio may escalate to 14.8 per cent.

With regard to public sector banks, Khan said the latest Financial Stability Report indicates that NPAs can go up to 16 per cent in severe case scenario but extreme case scenario has not been portrayed this time.
“Given the second wave all over the country, I think the extreme case scenario is something which one has to factor in. So, 18-20 per cent NPL (non-performing loan) is not ruled out for public sector banks.

“So, systemic risk is something which the government does not want to take upon its shoulder,” he said.

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HDFC Bank shows loan growth in Q4, but faces impact of non-issuance of credit cards, BFSI News, ET BFSI

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HDFC Bank, which has been hit by the Reserve Bank of India curbs on credit card issuances, saw a tepid growth in advances in the quarter ended March 2020 with total loans growing 14% on a year-on-year basis, lower than analysts’ expectations of a 16% growth.

HDFC Bank shows loan growth in Q4, but faces impact of non-issuance of credit cards

The slowdown in loan growth was mainly due to a lacklustre rise of 7.5% in retail loans over last year. Experts attributed the drop to conscious moderation in vehicle finance and commercial vehicle lending plus a prolonged suspension in new card business acquisition.

However, the wholesale loans which though slowed sequentially grew at 21% year-on-year owing to the bank’s focus on capturing market share in better-rated corporates.

After the pandemic, the bank has changed its strategy to offset lower retail lending growth in the rest nine months of the last fiscal year through higher corporate loan growth, which grew at an average of 30% year-on-year.

The curbs

The Reserve Bank of India in December 2020 had asked HDFC Bank to temporarily stop all digital launches and sourcing new credit card customers. This after the bank suffered its third big outage in the span of just two years.

The RBI has advised to stop all launches of the Digital Business generating activities planned under its program – Digital 2.0 (to be launched) and other proposed business generating IT applications and (sourcing of new credit card customersHDFC bank said in an exchange filing

“The above measures shall be considered for lifting upon satisfactory compliance with the major critical observations as identified by the RBI.”

Other banks

IndusInd Bank too reported loan growth slowing significantly with a 3% growth over March last year. Though deposits grew at a healthy pace of 27% though on a low base. Yes Bank too reported tepid loan growth numbers with a 0.8% rise in advances over last year. It more than doubled its retail disbursements over March quarter last year when it had faced a moratorium from the Reserve Bank of India. Its deposits grew at 54.7% bulk of which came from current and savings accounts. Private lender Federal Bank also reported a 9% growth in its advances over the same period last year while deposits grew 13%.The year ahead

Banks are likely to report lacklustre loan growth numbers in the quarters ahead. The system loan growth at 6.5% for the fortnight ended March 12, remaining weak due to low credit demand. Deposit growth at over 12% continues to outpace credit. Almost Rs 5.4 lakh crore of excess liquidity parked in the reverse repo window March shows the risk aversion in the banking system.

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Private banks’ net advances grow in March quarter

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The largest private lender HDFC Bank has shown a 13.9% year-on-year (y-o-y) growth in the loan book.

Private lenders have reported an improvement in the net advances during the March quarter (Q4FY21), according to provisional data released by the banks. While the largest private lender HDFC Bank has shown a 13.9% year-on-year (y-o-y) growth in the loan book, Federal Bank reported over 9% y-o-y growth in the advances. Similarly, IndusInd Bank has shown a 3% y-o-y increase in the net advances during the March quarter.

Although, Yes Bank has registered a meagre 0.8% y-o-y loan growth, its retail disbursements more than doubled to Rs 7,828 crore during Q4FY21. The provisional data also suggests a robust deposit growth for private lenders.

While Yes Bank’s deposits grew 54.7% y-o-y, IndusInd Bank registered a 27% deposit growth during the March quarter.

Similarly, HDFC Bank has shown a 16.3% y-o-y growth and Federal Bank showed a 13% growth in its deposit base.

The growth was supported by a strong current account savings account (CASA) deposits rise of 51.8% in Yes Bank, 27% growth in HDFC Bank and 26% in Federal Bank. In early March, rating agency Crisil said that in FY21, bank credit was seen rising 4-5%. This was a revision of the rating agency’s projection from June 2020, when they had expected the bank credit growth to be 0-1%.

In FY22, Crisil expects the bank credit to bounce back to 9-10% levels, driven by a pick-up in corporate credit, the government’s infrastructure push and a likely revival in demand. According to RBI’s latest bulletin, private banks clocked a credit growth of 8.6% y-o-y till February, 2021. The bulletin also mentioned that credit growth of scheduled commercial banks (SCBs) appears to have bottomed out as it grew at 6.6% y-o-y in February, 2021. Later, the non-food credit grew at 6.44% y-o-y for the fortnight ended March 12, 2021.

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