IndusInd Bank Q2 results preview: Higher provisions may drag profit lower by up to 80%

NEW DELHI: IndusInd Bank is likely to report an up to 80 per cent fall in September quarter net profit as the bank is seen increasing provisions to shore up provision coverage ratio. Net interest income (NII) is seen falling in single digits while the net interest margin (NIM) is seen flattish.

The loan book for the bank grew 1.6 per cent year-on-year (YoY) to Rs 2,00,242 crore in the September quarter while deposits grew 10.3 per cent to Rs 2,28,460 crore during the same period.

HDFC Securities expects the private lender to report a 63.9 per cent drop in profit at Rs 500 crore on a 3.2 per cent drop in NII at Rs 3,200 crore. Pre-provision operating profit is seen declining by 3.4 per cent to Rs 2,510 crore.

"We expect core earnings to grow at 10 per cent. Non-interest income growth is expected to slow to 22.1 per cent led by lower fees and treasury gains. We have factored in higher provisions of Rs 1,840 crore, up 150 per cent YoY, as we expect the bank to shore up coverage and build higher Covid-19 related provisions," HDFC Securities said.

Edelweiss sees IndusInd's profit tanking 77.8 per cent to Rs 307 crore.

"Loan book is expected to contract. Credit costs will be elevated due to higher provisioning for Covid-19. On the asset quality front, repayments in commercial vehicle and MFI portfolio as well as the proportion of book under restructuring needs to be looked at," it said.

Nirmal Bang's profit estimate is similar at Rs 321 crore, down 77 per cent. This brokerage sees a 2.6 per cent drop in NII at Rs 3,221 crore. Pre-provision operating profit is seen falling by 3.7 per cent at Rs 2,722 crore. NIM is expected to rise 9 basis points to 4.3 per cent, the brokerage said.