Analyst Concall
IndusInd Bank MD sees pickup in microfin disbursals Oct-Dec
This story was originally published at 22:04 IST on 24 October 2024
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--IndusInd Bank: Microfinance disbursals picking up; we remain watchful
--IndusInd Bank: NIM impacted by slowdown in microfinance dusbursals
--IndusInd Bank MD: Retail disbursements to pick up Oct-Mar with seasonality
--IndusInd Bank MD: Slippages in Jul-Sept largely from microfinance business
--IndusInd Bank MD: Watchful of growth in unsecured business segment
--IndusInd Bank MD: I am very bullish on the microfinance segment
--IndusInd Bank: Seeing stress in microfinance business in some states
--IndusInd Bank: Expect loan disbursements, recoveries to be better Oct-Mar
--IndusInd Bank: Seeing green shoots in vehicle financing
--IndusInd Bank: Remain cautiously optimistic on growth
--IndusInd Bank: May not achieve 18-22% loan growth this year
--IndusInd Bank: Will continue to optimise operating expenditure
--IndusInd Bank: Returns on assets will normalise as retail growth improves
By Kshipra Petkar and Richard Fargose
MUMBAI – IndusInd Bank expects disbursals in the microfinance segment to improve in Oct-Dec on the back of seasonality but stay below their potential, according to its Managing Director Sumanth Kathpalia. "We expect disbursements to improve this quarter but may still be lower than our distribution potential," he said at a post-earnings analyst call.
Kathpalia also said the bank remains cautiously optimistic about growth in the current financial year. "If we see that the market is improving in the microfinance segment and once we see our own portfolio and the quality of the book improving, we will start dispersing at a faster pace, which we have not been doing. I think we will continue to watch that space," he said.
The bank’s advances were INR 3.57 trillion as of Sept. 30, up 13% from a year ago. The bank reported a growth of 18% in loans in the year ended March. The slowdown in growth in advances is mainly due to a 5% on-year decline in microfinance loan book to INR 327 billion as of Sept. 30.
He said that he expects disbursements and recoveries to be better in the second half of the current financial year.
On the bank's margins, Kathpalia said they were affected due to lower disbursements in the microfinance segment. "We had a negative 6% growth in the unsecured book. If we can moderate that to even 1-2%, I think the margin should stabilise," Kathpalia said. IndusInd Bank's net interest margin moderated to 4.08% in Jul-Sept from 4.25% a quarter ago.
Most of the slippages of the bank were from the microfinance segment, Kathpalia said, adding that during Jul-Sept, slippages worth INR 3.98 billion were from the microfinance segment. The bank reported fresh slippages of INR 17.98 billion in Jul-Sept.
"I think we've been very, very cautious on the disbursements, specifically in some parts of eastern India, where we are seeing issues coming in and over-leveraging in states like Jharkhand, Bihar and Maharashtra," he said. "I think there are still some state elections which have to happen. We have to continue to watch whether the disbursement cycle picks up in the microfinance industry."
Kathpalia said the bank is seeing some "green shoots" in vehicle financing. "I think it's not as good as what it was last season but, we are seeing some green shoots and business is coming up."
"I think the normalised disbursement for vehicle finance is around 10,800 to 12,000 crores (INR 108 billion-INR 200 billion). I think we are already there at 10,600 crore (INR 106 billion) last quarter. We should move to 12,000 crore (INR 120 billion) this quarter being the festive season. There should be a 10% or 11% jump this quarter and you will see the book growing as a consequence of that," he said.
Kathpalia said that if the microfinance business picks up, that could help improve the bank's retail growth. "So, I think the biggest part is microfinance. If it comes back to what it is, I think we should be able to get back to our retail growth. This year, obviously, I don't think we should be able to do 18 to 22%. I think, given what has happened, I think we have to watch quarter to quarter how our growth is," he said.
"My opinion, you will see stability (in microfinance) much faster than what we are anticipating. I am very bullish on the microfinance segment. And I think you will see stability coming very soon. Let's cut to quarter three and quarter four. You will see a very different microfinance segment," Kathpalia said.
The bank’s loan-to-deposit ratio is at 86% and the bank has the bandwidth to move to 89-90%, he said. IndusInd Bank will continue to optimise its operating expenditure, Kathpalia said, adding that he is confident of delivering returns on assets at normal levels once retail growth improves in Oct-Mar. The bank's returns on assets during Jul-Sept dropped to 1% compared with 1.70%-1.93% in the previous four quarters.
On Thursday, shares of IndusInd Bank closed 0.5% higher at INR 1280.05 on the National Stock Exchange. End
Edited by Saji George Titus
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