IndusInd Bank Ltd's net profit for the quarter ended 31 December 2012 rose 30% on demand for loans. Net profit rose to   267 crore from   206 crore in the year earlier, beating the estimate of analysts. A Bloomberg survey of analysts estimated the Bank's net profit at   263 crore. Its loans grew 31%, almost double the growth of the banking industry.

IndusInd Bank's fee income rose 34% to   356 crore due to earnings by selling trade and remittance products, foreign exchange, mutual funds and insurance. Net interest income, too, increased by an identical margin to   578 crore from   431 crore.

"Demand for loans came from consumers seeking vehicle loans and loans against property. There was also demand for working capital loans from companies," Managing Director and Chief Executive Romesh Sobti said. IndusInd Bank expects to end the year with a 25% to 30% growth in credit demand. Profits increased despite an increase in provisions as the Bank set aside 44 crore to provide for a
  100 crore loan to Deccan Chronicle Holdings Ltd., which has turned bad.

Provisions other than tax went up to   79 crore from 43 crore in the quarter ended December 2011, mainly because IndusInd Bank had to set aside money for the Deccan Chronicle account. "We have offloaded the Deccan Chronicle loan to an asset reconstruction company for   63 crore. The rest of the amount has been written off," Sobti said. IndusInd Bank is one of the 14 lenders that have given loans to the Hyderabad-based media company, which is facing a financial crunch.

Net interest margins, or the difference between interest earned and interest expended, improved to 3.46% in October-December from 3.25% in the same period in 2011. Sobti said a drop in deposit rates has helped the bank recoup margins. "As our deposit costs go down our margins improve. For every 100 basis points (bps) drop in deposit rates, there is a 32 bps improvement in the margins and we expect it to continue to improve in next few months," he added. One basis point is 0.01%.

About 51% of the Bank's   42,426 crore loan book are loans to consumers for buying automobiles and equipment.

IndusInd Bank's strong results are a pointer to a good quarter for other private banks. IndusInd is the first among banks to announce results, said Jaiwant Dang, equity research analyst at JHP Securities Pvt. Ltd. "This bank has managed its risk well. There is no real threat to it except for a sharp rise in restructured loans," Dang said. "Its dependence on auto loans is also exaggerated."

Sobti disagreed. "We are one of only two, three financers who have seen a growth in demand for auto loans. We are well-diversified in terms of geography as well as customers," Sobti said.

The Bank's net bad loans were 0.30% of net advances in the December quarter, just 1 bps higher from the year-ago quarter. Restructured loans constituted 0.26% of overall loan portfolio in December, up from 0.19% in September, but much less than public sector banks, both in absolute and percentage terms.

Courtesy: Mint, January 2013