IndusInd Bank expects strong fourth quarter for vehicle finance business
The bank's MD and CEO also shared his key takeaways from Budget 2025.
IndusInd Bank's vehicle finance business is set for its strongest quarter in January-March 2025, says MD & CEO Sumant Kathpalia.
After a challenging first half of the year, the sector is witnessing a rebound, with disbursements reaching ₹13,300 crore last quarter.
Continued growth in vehicle finance is expected to drive retail expansion.
The bank’s net profit declined 39% year-on-year (YoY) in the October-December 2024 quarter to ₹1,402.3 crore from ₹2,301 crore in the same quarter last year.
The company, which has a current market capitalisation of ₹80,577.31 crore, has seen its shares lose more than 32% over the last year.
These are the edited excerpts of the interview.
Q: Let us talk about both business growth and margins. Because of the slightly more cautious go-slow approach on the unsecured side of the business, yields, to an extent, get impacted. And now we are expecting the rate cut cycle to begin as well - your net interest margin slipped just below the 4% mark in the third quarter. What is the guidance given the market environment?
A: It would be very unfair to give guidance as of now, and I would like to refrain from giving it. What we have to watch out is how the growth comes back in the microfinance business. This quarter will define whether disbursements come back and the collection efficiencies are sustained.
The vehicle finance business should have its best quarter. We did ₹13,300 crore of disbursement last quarter, if we can do better than that and continue to grow the vehicle finance - the industry went through a very tough first two quarters - and we should start seeing the retail growth coming back as a consequence. And our margins come as a consequence of a portfolio mix. Today, the portfolio mix is tending more towards corporate. We should be 56:44, today we are 53:54 and the mix change will define our margins.
Q: Let me come to the Budget. There is more money in the pockets of people earning ₹12 lakh, and maybe even people up to ₹25 lakh - it makes a big difference if you have ₹10,000 more in your hand. Do you see that as a reason why you will have more retail loans, more personal loans, and perhaps even save for once?
A: If you look at this Budget, there has been a balanced approach towards three key aspects. One is consumption, the other is capex, and the third is the fiscal deficit.
If you look at the tax threshold, which has been changed from ₹7 lakh to ₹12 lakh, and also the slabs which have been changed, I fully agree that it should boost consumption and the disposable income of the middle class will improve considerably.
What is more important is the launch of a comprehensive program like Rural Prosperity and Resilience, aiming to address women entrepreneurs. And this augers well for the marginal farmers, women entrepreneurs, and specifically for the microfinance segment. So we are going to see a consumption coming up. We are going to see rural India continuously doing well. It is a very pragmatic, forward-looking budget, and they have addressed lot of gaps, which existed in rural India as well as the middle class, and the household sentiment, which was one of the objectives of the budget, has been met as a consequence of that.
Q: What would you say will be your loan growth because of these positives? Will it go up to mid-teens?
A: Give me another quarter. I have always said guidance has been 56-58% retail. That is where IndusInd Bank will make 4-4.2% net interest margins (NIMs) - that is exactly the split that the bank wants.
