IndusInd Bank shares sink 18% on weak Q2 results; provisions & contingencies jump 87% YoY

The stock declined as much as 17.8% to ₹1,052.05 apiece on the BSE in the morning trade.

The bank's provisions and contingencies ballooned 87% on a year-on-year (YoY) basis to ₹1,820 crore from ₹974 logged in the corresponding quarter of the previous fiscal. 

This includes an increase of ₹525 crore in the contingent provisions as a prudent measure by the bank. Total loan-related provisions as of September 30, 2024, were at ₹8,412 crores (2.4% of loan book), the lender added.

Provisions refer to a liability that is uncertain regarding its timing or amount. It is the amount that banks keep aside from the profit to meet a potential expense or obligation. A provision is a liability account and consists of establishing and 'saving' several resources for the said expense or obligation.

Contingent liabilities are those probable obligations that may arise in the future due to present or past situations.

Key headline figures

IndusInd Bank's net interest income (NII) for the quarter ended September 30, 2024, came in at ₹5,347 crore and grew by 5% YoY while net interest margin (NIM) stood at 4.08% against 4.29% in Q2 FY 2024 and 4.25% for Q1 FY 2025.

"The net interest margin was lower as the bank reduced its share of microfinance loans in the overall loans," it said. 

Its net profit stood at ₹1,331 crore, down 39.5% YoY as compared to ₹2,202 crore logged in the year-ago period. Net profit for Q2-FY25 adjusted for an increase in contingent provision buffer was at ₹1,725 crore.

Asset quality of the bank deteriorated, with gross non-performing assets (NPAs) rising to 2.11% of gross advances at the end of the September quarter of 2024, as against 1.93% a year ago.

Net NPAs or bad loans also rose to 0.64%, as against 0.57% in the year-ago period.

The capital adequacy ratio of the bank decreased to 16.51% from 18.21% at the end of September 2023.

Pre provision operating profit (PPOP) was reported at ₹3,600 crore for the quarter ended September 30, 2024, as against ₹3,909 crore registered in the corresponding quarter of the previous fiscal.