At the industry level, bank credit growth has been languishing at 5-8 per cent levels over the past three years. A few banks though, have remained resilient, clocking healthy earnings growth during this period. IndusInd Bank, that has been registering 25-30 per cent earnings growth in the last couple of quarters, has not seen any material deviation from its robust past performance in the latest September quarter.

A well-diversified portfolio leading to above-industry loan growth, increasing share of low-cost deposits and higher proportion of fixed rate loans aiding margins, healthy growth in fee income and stable asset quality — these sum up the bank’s performance in the latest September quarter. The bank’s 25 per cent growth in net profit during the September quarter, has been achieved thanks to the strong 24 per cent growth in loans and 25 per cent growth in net interest income. The healthy growth of 22 per cent in the bank’s fee income further aided earnings.

Apart from the healthy growth across key segments, growth in the commercial vehicle financing segment, that had moderated last fiscal, is slowly recovering. Within retail, barring credit cards, gross non-performing assets as a per cent of loans fell for other key segments in the September quarter vis-à-vis the June quarter. In any case, at the aggregate level, the bank has been maintaining steady asset quality over the last several quarters.

What’s ticking?

Thanks to its well-diversified loan portfolio, IndusInd Bank has been able to offset the slackness in one segment, with lending opportunities in other segments. For instance, within the retail segment, over a third of loans comes from commercial vehicle financing. Despite the sluggishness in this segment in recent quarters, the bank has been able to grow its retail book upwards of 20 per cent, thanks to other segments firing on all cylinders.

In the September quarter, the CV segment too saw a recovery. After clocking a modest 11 per cent growth in 2016-17, growth picked up marginally in the June quarter to 12 per cent. This inched up further to 15 per cent in the September quarter. While the bank has been recording a robust growth in riskier loans such as credit cards, and loan against property, among others it has managed to keep bad loans under check. Within corporate loans again, a granular portfolio has helped. Also, the MCLR framework has helped the bank offer competitive rates and tap into opportunities in the corporate segment, particularly working capital financing.

The bank’s one-year MCLR has fallen to 8.95 per cent as of September 2017 from 9.75 per cent as of September 2016. The 60-80 basis point fall in yields over the past year has been offset by a commensurate fall in cost of deposits.

Hence, on the margin front, a couple of factors have aided the stable performance in a falling rate scenario. One, IndusInd Bank has relatively higher proportion of fixed rate loans (70 per cent). Two, increasing share of low-cost CASA deposits — there has been a near two percentage increase in CASA ratio for the bank between the September quarter of last year and the current fiscal. Trimming of relatively higher rate on savings deposits that the bank has been offering, also aided margins.

The bank’s bad loans have also been under check, despite the stellar run in loans. The gross non-performing assets (GNPA) stood at 1.08 per cent of loans as of the September quarter. Restructured assets as a proportion of loans are also low at 0.16 per cent.

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