IndusInd Bank has ended yet another challenging year for the sector on an upbeat note. The key factors that helped the bank are: a well-diversified portfolio leading to steady traction in loans, higher proportion of fixed-rate loans aiding margins, the new marginal cost of funds-based lending rate (MCLR) framework opening up opportunities in the corporate space, healthy growth in fee income, and stable asset quality.

For the full fiscal 2016-17, the bank reported a 25 per cent growth in net profit, backed by strong loan growth of 28 per cent and stable margins of around 4 per cent.

Loan growth over the past several quarters has been driven by both the corporate and retail segments.

A diversified loan portfolio has helped.

Within the retail segment, over a third of the loans still come from commercial vehicle (CV) financing. After clocking 33 per cent in 2015-16, growth in this segment moderated to 11 per cent in 2016-17.

Nonetheless, other segments within retail have been firing on all cylinders. The bank’s diversification into car loans, credit card and loan against property, among others, has helped offset the slackness in the CV business.

While retail loans reported an overall growth of 25 per cent, it was the corporate segment that led the growth for the full year, rising 30 per cent year-on-year (y-o-y). The MCLR framework has helped the bank offer competitive rates in the corporate segment, particularly working capital financing.

Maintaining margins

On the margins front, a couple of factors have helped. IndusInd’s relatively higher proportion of fixed-rate loans (70 per cent) has cushioned the impact on yields.Increasing share of low-cost CASA (current account, savings account) deposits and the sharp fall in deposit rates have also aided margins.

IndusInd, over the past one to two years, has also been trimming the relatively higher rate it offers on savings deposits.

The bank’s bad loans have also been under check, with gross non-performing assets (GNPA) at 0.93 per cent of loans as of the March quarter.

During the March quarter there has been a one-off provision of Rs 122 crore as per RBI’s directive. The Bank’s exposure due for repayment in June 2017 relates to a bridge loan for an M&A transaction in cement industry.

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