Indian Bank jumps 7% after lower provisions lift Q1 profit, but slippages remain elevated

Indian Bank shares rallied 6.7 percent intraday on August 6 after lower provisions and other income lifted June quarter profitability 75 percent year-on-year, but slippages remain elevated on sequential basis.

The stock has fallen nearly 50 percent in the last one year, but August 6 gain was in addition to the 3.5 percent upside seen in the previous session. It was quoting at Rs 199.75, up Rs 9.85, or 5.19 percent, on the BSE at 1049 hours.

Profit in the June quarter increased sharply by 74.6 percent year-on-year to Rs 365.4 crore, but net interest income fell 1.2 percent YoY to Rs 1,785.4 crore due to higher cost of funds and elevated slippages in Q1.

Slippages for June quarter stood at Rs 1,077 crore, rising 7.2 percent sequentially, though declined more than 22 percent year-on-year. Annualised slippage ratio jumped to 2.34 percent in Q1 against 2.14 percent in previous quarter.

"Corporate slippages were of Rs 430 crore of one account in Q1. We have an exposure of Rs 2,800 crore in NCLT. We expect couple of recoveries from NCLT cases in FY20 from Bhushan Steel etc. The part of exposure to ADAG is NPA while Rs 200 crore of exposure remained standard," Padmaja Chunduru, MD & CEO, said in an interview to CNBC-TV18.

Chunduru said she expected an overall loan growth of 15 percent led by corporate loan growth at 12 percent.

Asset quality also weakened further, with gross non-performing assets (NPA) as a percentage of gross advances rising to 7.33 percent against 7.11 percent QoQ and net NPA climbing to 3.84 percent against 3.75 percent QoQ.

Cost of deposits remained higher at 5.4 percent in Q1, against 5.34 percent in March quarter and 5.15 percent in June quarter in 2018 , which also impacted net interest margin.

Domestic net interest margin contracted 10bps sequentially and 29bps YoY to 2.85 percent in the June quarter.