IndusInd Bank deposits fell 10-11% after YES Bank crisis

In the aftermath of the YES Bank crisis, deposits with private sector lender IndusInd Bank fell from around 10% to 11%, most coming from government-linked accounts. There might be some delinquency in unsecured loans due to foreclosure, but the lender is confident in a repossession.

In a conference call with analysts on Monday evening, the bank’s new chief executive and CEO Sumant Kathpalia said total deposits fell from 10% to 11%, of which nearly two-thirds were in linked accounts. to the government.

“He added that premature term deposit withdrawals were minimal while some were not rolled over. The bank also recorded withdrawals from business deposits, although withdrawals from retail accounts were relatively lower. The bank replaced the withdrawal of deposits with longer term refinancing / foreign exchange loans, bank CDs, excess SLRs and overnight cash, ”ICICI Securities said in a statement, adding that the liquidity coverage ratio was maintained at around 112 percent on a daily basis. based.

“We attended the conference call organized by IndusInd Bank (IIB) where management indicated slower loan growth, a comfortable liquidity position despite outflows of deposits and a possibility of deterioration in asset quality.” said ICICI Securities.

In a note released on Tuesday, Emkay Global Financial Services said the bank’s institutional deposits have declined after the YES Bank saga, which have been replaced by CDs / borrowings and will ultimately be replaced by retail deposits.

“The new managing director and CEO has reiterated his long-term stance on asset and liability retail, drawing lessons from his recent past,” he said.

Retail banking

IndusInd Bank also told analysts that it plans to rebalance its portfolio in favor of consumer banking, which should lead to an increase in margin / RoA in the long run.

According to Emkay’s note, the deterioration in asset quality could accelerate due to the foreclosure. “Bank says cards / PL, real estate and property loans are currently showing early signs of disruption, while diamond (no postcode) and commercial vehicle wallets are well tested on cycles with a higher customer base and are expected to rebound back as normalcy returns, ”he said.

ICICI Securities said the lender has indicated that the cost of credit for the fourth quarter could reach 200 to 210 basis points due to accelerated provisioning of existing APMs and gradual slippages. The bank said defaults on unsecured loans, such as PLs and credit cards, could increase by 30 to 40 basis points, but is confident of microfinance recovery trends when the foreclosure will be lifted, ”he said.

He also said loan growth could be contained for a few quarters and then pick up as the situation improves to 8% to 10% in the next fiscal year.

Kathpalia took over from Romesh Sobti as Managing Director and CEO of IndusInd Bank earlier this month. On Tuesday, the bank’s scrip fell 14.68 percent to close at 351.15 each on BSE.

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