IndusInd Bank Q2 Results

IndusInd Bank Q2 Results: 40% YoY Net Profit Decline & NIM Moderation

IndusInd Bank reported a significant decline in its consolidated net profit for the second quarter (Q2) of the financial year 2025 (FY25), with profits falling by 39.5% year-on-year (YoY) to ₹1,331.29 crore, compared to ₹2,202.16 crore in the same quarter last year. This dip in profit was mainly attributed to an increase in provisions.

Key Financial Highlights

• Net Profit: ₹1,331.29 crore, a 39.5% decline from ₹2,202.16 crore YoY.
• Net Interest Income (NII): ₹5,347 crore, a 5% increase YoY.
• Net Interest Margin (NIM): 4.08%, down from 4.29% YoY and 4.25% in Q1 FY25.
• Yield on Assets: 9.69% for the quarter.
• Cost of Funds: 5.61%, compared to 5.40% in Q2 FY24.
• Other Income: ₹2,185 crore, down from ₹2,282 crore YoY.
• Operating Expenses: ₹3,932 crore, a 14% increase YoY.
• Pre-Provision Operating Profit (PPOP): ₹3,600 crore, down 8% YoY from ₹3,909 crore.
• Provisions and Contingencies: ₹1,820 crore, a sharp increase from ₹974 crore in the corresponding quarter last year.

Deposit and Loan Growth

• Total Deposits: ₹4,12,397 crore, a 15% increase YoY from ₹3,59,548 crore.
  • CASA Deposits: ₹1,47,944 crore, with a 35.87% share of total deposits.
  • Retail Deposits (as per LCR): ₹1,81,911 crore, up 16% YoY.
• Advances: ₹3,57,159 crore, marking a 13% growth YoY from ₹3,15,454 crore.

Loan Book Quality

IndusInd Bank’s loan book quality remains stable. The gross non-performing assets (NPA) ratio stood at 2.11% of gross advances, slightly higher than 2.02% in the previous quarter. Net NPAs were at 0.64%, compared to 0.60% in the previous quarter.

The bank significantly increased its provisions during the quarter, with provisions and contingencies rising to ₹1,820 crore, nearly double the ₹974 crore reported in the same quarter last year. This includes ₹525 crore in contingent provisions as a prudent measure.

Share Performance

Shares of IndusInd Bank ended 0.53% higher at ₹1,278.90 per share on Thursday, October 24.

Pin-to-Pin Explanation

1. Net Profit Decline
   IndusInd Bank’s net profit dropped by 39.5% YoY to ₹1,331.29 crore due to higher provisions for contingencies and loan-related risks.
2. Net Interest Income (NII) Growth
   Despite the decline in profit, the bank’s NII saw a 5% YoY increase, reaching ₹5,347 crore, driven by higher loan advances and deposit growth.
3. Net Interest Margin (NIM) Moderation
   The NIM for the quarter stood at 4.08%, down from 4.29% in the same quarter last year. The bank attributed this decline to a reduction in the share of microfinance loans in its overall loan portfolio.
4. Provision Increase
   Provisions and contingencies saw a substantial rise to ₹1,820 crore, which included ₹525 crore in contingent provisions, impacting the overall profitability.
5. Deposit and Loan Growth
   IndusInd Bank’s deposits grew by 15%, with CASA deposits accounting for 35.87% of total deposits. Advances also showed healthy growth at 13% YoY, reflecting strong demand for loans.
6. Loan Quality Remains Stable
   Despite a slight increase in gross NPAs to 2.11%, the bank’s loan book quality remains stable, and it has taken additional provisions to safeguard against potential risks.

Advantages of IndusInd Bank’s Q2 Performance

• Growth in Deposits and Advances: The 15% increase in deposits and 13% growth in advances reflect strong customer confidence and loan demand.
• Stable Loan Book: Despite challenges, the bank has maintained stable asset quality with manageable NPAs.
• Prudent Provisions: The bank has taken proactive steps to increase its contingent provisions, which could provide a buffer for future risks.

Disadvantages of IndusInd Bank’s Q2 Performance

• Sharp Decline in Net Profit: The 39.5% drop in net profit is a significant concern and highlights the impact of higher provisions on profitability.
• NIM Moderation: The decrease in NIM reflects a shift in the bank’s loan portfolio, which may reduce future profitability if not addressed.
• Operating Expenses Growth: A 14% increase in operating expenses could pressure margins if revenue growth does not keep pace.

Conclusion

IndusInd Bank’s Q2 FY25 results reflect a challenging quarter, with a sharp decline in net profit due to higher provisions. However, the bank demonstrated resilience with growth in deposits and advances, alongside stable asset quality. While the moderation in NIM and increased operating expenses are areas of concern, the bank’s prudent provisioning and solid loan growth position it well for future stability.

FAQs

1. Why did IndusInd Bank’s net profit fall by 40% in Q2?
   The sharp decline in net profit was primarily due to a significant increase in provisions and contingencies to safeguard against potential loan risks.
2. How did IndusInd Bank’s net interest income perform in Q2?
   The bank’s net interest income rose by 5% YoY, reaching ₹5,347 crore, driven by higher advances and deposit growth.
3. What caused the decline in IndusInd Bank’s net interest margin (NIM)?
   The NIM decreased to 4.08% as the bank reduced its share of microfinance loans in its overall loan portfolio, impacting overall margins.
4. What is the state of IndusInd Bank’s loan book quality?
   The loan book quality remains stable, with gross NPAs at 2.11% and net NPAs at 0.64%, reflecting strong asset quality management.
5. What is IndusInd Bank’s outlook for future growth?
   While the bank faced challenges in Q2, it showed strength in deposit and loan growth, positioning it well for future stability. However, managing margins and expenses will be crucial for sustained profitability.

IndusInd Bank Q2 Results

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