IndusInd Bank's first-quarter net profit may increase 34% due to robust loan growth.

Private sector lender IndusInd Bank is expected to report a net profit increase of 34% for the first quarter of the current fiscal year due to healthy disbursements and a greater exposure to the consumer loans sector than its competitors, according to the average estimate of three brokerages.

In the first quarter of the previous fiscal year, IndusInd Bank reported a net profit of Rs 1,603.3 crore, up 5 percent from Rs 2,040.5 crore in Q4 FY23.

Analysts anticipate that the company's net interest income (NII) – the difference between interest earned and paid – will increase by 15.6% year-over-year to Rs 4,770 crore in Q1 FY23, compared to Rs 4,125.3 crore in Q1 FY22. In the three months preceding March 2023, the lender's net interest income (NII) was Rs 4,669.5 crore, and its net interest margin (NIM) was 4.28 percent.

Analysts at the domestic brokerage Ashika expect the bank's performance to improve across all business parameters in the first quarter of fiscal year 24. This will enable the bank to deliver a strong RoA (return on assets) powered by healthy growth in loan book and stable NIM.

"We anticipate NIM to remain stable due to an increase in the proportion of consumer loans, the stabilisation of deposit costs, and a decline in future risk premiums. "Over the past few quarters, loan growth has improved steadily," they reported.

At 10:15 a.m., shares of IndusInd Bank were trading 0.51 percent higher at Rs 1,399.70 on the BSE. The year-to-date return on the stock is 14 percent, while the one-year return is 64 percent.

Q1 Business update

IndusInd Bank reported a 21 percent increase in net advances during the first quarter of this fiscal year, with the figure reaching Rs 3.01 lakh crore from Rs 2.47 lakh crore a year earlier. Advances rose by 4% on a sequential basis.

At Rs 3.47 lakh crore, deposits are rising 15% annually and 3% quarterly. On June 30th, total deposits from consumers and small businesses amounted to Rs 1.5 lakh crore, up from Rs 1.4 lakh crore on March 31st.

CASA (current account and savings account) ratio for the lender fell to 39.9 percent in Q1 from 43.2 percent in Q1 of the previous year, the lowest level in 24 quarters.

CASA is a low-cost funding option that can increase a bank's net interest margin (NIM).

Nuvama Institutional Equities forecasts a steady NIM for the bank from Q1 to Q2, with credit costs moderating. The bank reported good quarterly loan growth of 3.8% and quarterly deposit growth of 3.2% in its most recent business update.

According to industry experts, banks will have a robust 1Q FY24 thanks to healthy credit offtake momentum, steady margins, strong treasury operations, and relatively moderated credit cost.

While the RBI's decision to halt interest rate hikes is good news for lenders about the cost of funding, monetary policy will be the most important thing to keep an eye on in FY24.

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Analysts may rest easy for the time being because to the robust demand for loans. The banking industry is currently one of the most stable sectors. Just make sure to include them when building your portfolio. You really can't go wrong with it. "Given the strength of the corporate balance sheets, the risk of NPAs are the lowest in a very long time," said Siddharth Bhamre, Research Head at Religare Broking. "The retail loan book is not growing much."

"The retail loan book has significant untapped potential." The level of personal debt is currently sustainable. Despite stagnant wage growth, aspirations have increased. He added, "The commodity cycle is down now, but businesses are already taking on debt to build up production ahead of the next upswing."

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