IndusInd Bank Q4 preview: Profit may fall sharply on muted operating performance

IndusInd Bank will report its Janurary-March quarterly earnings on April 27. The private lender is expected to register an 80 percent year-on-year fall in Q4 FY20 profit due to pressure on its operating earnings and higher provisions.

According to brokerages, pre-provision operating profit growth could be in single-digit YoY.

However, net interest income may see around 30 percent growth YoY, which is incomparable due to Bharat Financial Inclusion merger. Meanwhile, loan growth could slow down to around 15-20 percent YoY and higher cost of funds may dent net interest margin for the quarter.

"We expect a weak performance on operating metrics. Loan growth at around 20 percent YoY (includes Bharat Financial acquisition) while NIM will likely decline due to higher cost of funds (weak funding environment). We expect weaker performance on fee income growth," said Kotak Institutional Equities which sees profit declining 87.6 percent YoY and net interest income rising 30 percent YoY.

Sharekhan also feels operating parameters may remain under pressure, due to deposits decline and impact on rural/MFI segments.

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"Loan growth may slow, at around 20 percent YoY with NIMs too under pressure due to rise in cost of funds," said the brokerage.

It expects an 85 percent YoY decline in Q4 profit and a 27 percent increase in NII.

Most of the brokerages expect provisions to remain high on both year-on-year and quarter-on-quarter basis due to exposure to stressed assets like telecom and weakness in CV, rural segments among others.

"We expect higher provisions to mute profit growth, mainly as sectors like CV, Rural, select corporates, etc expected to weaken," said Sharekhan.

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Kotak also expects the bank to make higher provisions (resulting in negligible profits) especially with a benefit of a lower tax rate.

Asset quality on CV portfolio, guidance on credit costs given the exposures they have to select corporates that are currently under stress would be discussion areas for the quarter, it said.

IndusInd Bank share price crashed 80.3 percent during the financial year 2019-20 and 77 percent during the January-March quarter due to COVID-19-led correction, deposits outflow and exposure to telecom sector.