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IndusInd Bank Q2 net surges 30% to Rs 560 crore; to cut base rate

The bank reported an improvement in the gross non-performing assets ratio to 0.77 percent for the quarter as against the preceding quarter's 0.79 percent.

Mumbai: Mid-sized private sector lender IndusInd Bank on Friday reported a 30 percent rise in September quarter profit at Rs 560 crore on jump in performance across income lines.

The lender had posted a profit of Rs 430 crore for the July-September period last year.

Its core net interest income was up 31 percent to Rs 1,094.28 crore on 0.20 percent widening in the net interest margin to 3.88 percent on the back of a dip in cost of funds.

The component of the low-cost current and saving account deposits also grew to 34.74 percent from 33.89 percent year ago.

The non-interest income was up 32 percent to Rs 783.54 crore on a handsome jump in trade and remittances and fees earned from distribution of insurance and mutual funds.

The bank's Managing Director Ramesh Sobti today said it will be announcing a significant cut in its base rate next week, as it shifts to the marginal cost of funding-based formula to compute the offering as suggested by RBI.

At present, the bank adopts a hybrid model where it takes into account both the average cost of funds as well as the marginal cost of funds, he said, without divulging the exact extent of cut being planned.

Sobti said the bank had cut its rates by 0.15 percent after the RBI's prodding to banks in April.

He said the margins have also improved due to an increase in the proportion of higher margin retail loans, including the credit extended to truck owners which is showing an uptick after two years.

From a high of 49 percent, the share of retail had fallen to 41 percent and stood at 43 percent as on September end, he said, adding that the bank is targeting to get it up to nearly 50 percent by end of the fiscal.

The commercial vehicle segment is doing good due to both better realisations and a drop in the price of diesel, he said, adding that the asset quality troubles around the portfolio have also subsided.

The bank reported an improvement in the gross non-performing assets ratio to 0.77 percent for the quarter as against the preceding quarter's 0.79 percent, while the provisions more than doubled on a year-on-year basis to Rs 152 crore.

Sobti explained the integration of the newly acquired RBS' diamond portfolio of Rs 4,100 crore, which pushed up the credit growth to 31 percent, also resulted in a Rs 24 crore jump in standard asset provisioning.

It opened 43 branches during the three months to take the total number of branches to 685 and is confident of achieving the March 2016 target of 1,000 branches.

Bank officials explained with the advent of digital the skill quotients in employees is changing and accordingly, bank is hiring people who can do different work.

Sobti said over a long-term, this can help reduce the cost to income ratio as well.

The bank scrip closed 0.71 percent down at Rs 939 at BSE, as against a 0.87 percent gains in the benchmark BSE Sensex.