- Business Growth: 12% overall growth; Deposits up by 11%; Credit up by 13%.
- CASA Ratio: Domestic CASA ratio above 42%; CASA growth at 8%; Savings deposit growth at 7%.
- RAM Credit: 14% growth; Retail credit up by 15%; Housing loan growth at 11%; Auto loan growth at 49%; Personal loan growth at 10%.
- Agriculture Credit: 19% growth; Crop loan growth at 19%; Gold loan growth at 27%.
- Investment Credit: 10% growth; Agri allied growth at 62%; MSME growth at 6% (Standard MSME at 10%); Corporate credit growth at 10%.
- Net Profit: FY24 net profit growth at 53%; Q4 net profit growth at 55%.
- PBT (Profit Before Tax): FY24 growth at 85%; Q4 growth at 111%.
- NII (Net Interest Income): FY24 growth at 15%; Q4 growth at 9%.
- Non-Interest Income: FY24 growth at 10%; Q4 growth at 13%; Trading profit growth at 127%; Fee-based income growth at 11%; PSLC commission growth at 37%; Miscellaneous income growth at 27%.
- Expenditures: Salary expenses increased by 23% due to wage revision and retirement benefits provision.
- Gross NPA: Reduced to 3.95% from 11.39% in April 2020.
- Net NPA: Reduced to 0.43% from 4.19% in April 2020.
- Provision Coverage Ratio: Improved to 95%-96%.
- SMA (Special Mention Accounts): Reduced to 0.48%; Slippage at INR 1,200 crore.
- Capital Adequacy Ratio: 16.44%; Tier 1 and CET growth; Raised INR 4,000 crore capital.
- Recovery: INR 8,800 crore recovered against INR 8,000 crore target.
- Digital Transactions: 89% of transactions on digital channels in Q4 FY24, up from 85% in Q4 FY23.
- Digital Business: Increased from INR 5,640 crore to INR 81,250 crore in FY24.
- Net Interest Margin (NIM): Domestic margin at 3.54% for FY24; Q4 margin at 3.52%.
Release Date: May 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Indian Bank (BOM:532814, Financial) reported a 53% increase in net profit for FY24, driven by a 15% growth in Net Interest Income (NII) and a 10% rise in non-interest income.
- The bank's gross NPA ratio has significantly improved, dropping from 5.95% to 3.95% year-over-year, indicating better asset quality.
- CASA ratio remains strong at above 42%, with savings deposits growing by 7% and overall deposits increasing by 11%.
- Digital transformation initiatives have led to a 14-fold increase in digital business, reaching INR81,250 crore in FY24.
- Capital adequacy ratio stands at a healthy 16.44%, ensuring sufficient capital to support future growth.
Negative Points
- Employee expenses have increased by 23%, primarily due to wage revisions and provisions for retirement benefits, impacting overall expenditure.
- The bank's MSME credit growth is relatively low at 6%, indicating potential challenges in this segment.
- The new RBI guidelines requiring a 5% standard asset provision on project finance exposures could impact profitability, although the exact impact is yet to be determined.
- Despite strong growth in digital transactions, the bank's cost-to-income ratio has increased to 45%, up from 44% the previous year.
- The personal loan portfolio saw a slight decline quarter-over-quarter, raising questions about the bank's strategy in this segment.
Q & A Highlights
Q: Can you provide insights on the recent RBI guidelines requiring banks to provide 5% as a standard asset provision on project finance exposures? How much is our project finance exposure, and what is your view on these guidelines?
A: These are draft guidelines, and we will be submitting our comments. The guidelines differentiate between the construction phase and the operations phase, with higher provisioning during construction. Our RAM (Retail, Agriculture, and MSME) credit constitutes 60-63% of our portfolio, so the impact on Indian Bank will be minimal. We will further examine the guidelines and discuss them within the IBA.
Q: What is the rationale behind forming the new subsidiary, Indbank Global Support Services, and how much capital has been invested?
A: We started this operational subsidiary with a capital of INR10 crore. It will handle back-office operations, such as collection support and operational tasks, to save costs and improve turnaround time. The subsidiary has recruited people from the market and started operations from March 1.
Q: Given the competitive environment, can Indian Bank revise its credit growth target to 14-15%? Also, why is the SME growth only at 6%?
A: Our credit growth is 13%, and we are cautious with MSME lending due to higher NPAs in this segment. We are growing digitally and securely, with initiatives like pre-approved business loans and cluster-based financing. Our overall credit growth aligns with industry standards.
Q: What is the outlook for the investment book, particularly the AFS book, given the current interest rate environment?
A: Our investment has grown by 14%, and we have made significant investments at favorable rates. The holding yield for our AFS book is 7.28%, and for the HTM book, it is 7.06%. We expect better interest income and potential profits from this book in the coming quarters.
Q: Can you provide details on the recovery from the written-off book and the mix of various recovery channels?
A: We recovered INR2,858 crore from the AUC book, with INR1,800 crore booked in P&L and the rest as SR or OCD. Recovery channels include NCLT (INR1,817 crore), compromise recovery (INR1,505 crore), sale to ARC (INR464 crore), and other recoveries (INR3,072 crore). Our total recovery for the year was INR8,798 crore.
Q: What is the guidance on margins for the next year?
A: We ended the year with a margin of 3.54%. Given the tight liquidity market, we expect margins to be in the range of 3.40% to 3.50%, with a possible variation of 10-15 bps.
Q: What is the credit cost outlook for FY25 and FY26?
A: Our credit cost has come down to 0.57%, with net NPA at 0.43%. We expect the credit cost to decrease further, reflecting our improved asset quality.
Q: What is the strategy for the corporate book, particularly in segments like other infra, construction, and commercial real estate?
A: Growth in the corporate book is driven by sectors like city gas, smart metering, data centers, and solar panel manufacturing. We focus on quality credit with better margins. In commercial real estate, we see opportunities in data centers, office spaces, and warehouses, with interest rates near the one-year MCLR.
Q: How does Indian Bank plan to leverage digital transformation and shared services to improve cost-to-income ratio and product offerings?
A: Our digital journeys have significantly improved asset quality and profitability. We plan to launch a new omnichannel mobile app and continue investing in digital infrastructure. Our goal is to reduce the cost-to-income ratio below 44% by enhancing income streams and maintaining better margins.
Q: What are the future plans for Indian Bank's digital initiatives and their expected impact?
A: We aim to cross INR1 lakh crore in digital business this year, with ongoing projects like the omnichannel app and various digital lending platforms. These initiatives will reduce operating costs and improve customer experience, contributing to the bank's growth.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
