The Hinduja Group-promoted Indusind Bank on Tuesday reported 67.8 percent decline in net profit to Rs 460.64 crore in the June quarter, driven down by a five-fold increase in provisions for bad loans and special capital allocations for the pandemic. The bank had posted a net profit of Rs 1,432.50 crore in the same quarter previous fiscal.

The lender also announced a Rs 3,288-crore capital raising - first in four years - through a preferential allotment route. The massive fall is the bottomline numbers in spite of the private sector lender clocking a 16.4 percent growth in net interest income to Rs 3,309.2 crore, aided by a marginal increase in net interest margin to 4.28 percent from 4.25 percent in the reporting quarter.

Total income inched up to Rs 8,682 crore from Rs 8,625 crore, while total expenses came down to Rs 5,754 crore from Rs 6,034 crore. Fee income slipped to Rs 1,520 crore from Rs 1,663 crore, while operating expenses fell marginally to Rs 1,902 crore from Rs 1,916 crore. Pre-provision operating profit stood at Rs 2,928 crore, up 13 percent.

Gross non-performing assets rose to 2.53 percent, over 2.45 percent in March and 2.15 percent year-on-year, while the net bad loans improved to 0.86 percent of net advances compared to 0.91 percent in March and 1.23 percent in June 2019.

Total provisions, comprising specific, floating, general and standard assets provisions, were 96 percent of the gross non-performing loans, Sumant Kathpalia, the managing director & chief executive told reporters on a concall.

"We did see considerable sluggishness in economic activities during the quarter, following the outbreak of the pandemic, which also impacted business volumes across sectors.

"During the quarter, we had a full 5 percent sequential growth in deposits, and 2 percent quarter on quarter growth in loans (1 percent y-o-y), strengthened our balance sheet by taking provision cover up to 67 percent from 63 percent in March and from 43 percent in June 2019, and delivered our highest ever pre-provision operating profit margin of 3.95 percent as a percentage of total assets," he said.

On the impact of the moratorium on the books, he said, while in the first round 100 percent MFI borrowers opted for the provision, in the second round it improved massively to 16 percent of the total assets of which 19 percent retail borrowers and 9 percent corporates.

According to the bank management, this indicates early green-shoots but they were quick to add that its too early to offer a guidance. The bank saw provisions and contingencies shooting up significantly to Rs 2,258.9 crore in the quarter largely due to the pandemic-related provisions, rising five-fold over Rs 430.6 crore reported in year-ago period. However, the provisions are down 7.4 percent quarter-on-quarter.

Of the total provisions, Rs 920 crore are for the pandemic, taking the overall pandemic driven provision to Rs 1,203 crore, and Kathpalia said the bank will have to set aside Rs 100 crore more towards this in the next quarter. The banks, based on an internal stress-test on the impact of the pandemic and the level of economic activities and the projected trajectory for the near future, made a counter-cyclical buffer/floating provision of Rs 500 crore, over and above Rs 260 crore made during the March quarter.

The bottomline was impacted as non-interest income slipped 8.7 percent year to Rs 1,519.2 crore due to the lockdowns, but pre-provision operating profit grew by 10 percent to Rs 2,861.33 crore. He also said the banks has factored in an additional 92 bps slippages in asset quality due to the pandemic based on the stress-test.

On the emergency COVID-19 loan, he said the bank has a provision for over Rs 3,200 crore of which they have sanctioned Rs 1,700 crore and disburse on Rs 280 crore so far. He said the bank is sitting on an excess liquidity of Rs 30,000 crore and the fund-raising is neither due to the pandemic nor for growth capital but is confidence capital.

The capital adequacy ratio stood at 15.16 which will go up to 16.5 after the fund raising, and liquidity coverage Ratio at 124, showing the strength of operating performance and adequacy of capital and liquidity buffers, he said.

Total deposits grew 5 percent to Rs 2,11,265 crore of which the low coast Casa deposits stood at Rs 84,473 crore with current account deposits at Rs 31,946 crore and savings account deposits at Rs 52,527 crore. Casa deposits comprise 40 percent of the total deposits.

Total advances rose to Rs 1,98,069 crore from 1,93,520 crore, up 1 percent.

Provisions and contingencies for the quarter rose to Rs 2,417 crore comprising provisions for credit and other losses at Rs 2,259 crore and towards taxes on income at Rs 159 crore, from Rs 1,158 crore comprising provision for credit and other losses at Rs 431 crore and towards taxes on income at Rs 727 crore for June 2019.

Of this the pandemic provisions add up Rs 1,203 crore, including provision made during the quarter at Rs 920 crore, he said. The Indusind counter gained over 4 percent to Rs 526.90 on the BSE whose benchmark rallied 1.5 percent.