IndusInd Bank Q3 Results: Margin pressure, asset quality in focus after loan book decline

Shares of IndusInd Bank are trading with modest gains on Friday, January 23, ahead of the lender's December quarter results.

According to a CNBC-TV18 poll, the lender's core income is likely to drop close to 17% from last year to ₹4,353 crore from ₹5,228 crore earlier. The potential drop in core income is due to the 13% decline in its loan book growth that the lender had reported earlier in the month.

Its net profit may see a sharp drop, according to the poll to ₹42 crore, 97% lower than last year's figure of ₹1,402 crore. However, analyst estimates range between a profit of ₹300 crore to a loss of ₹2,000 crore.

Fee income for the lender is likely to drop 29% year-on-year. A combination of weak loan growth, pressure on margins and weak fee income may lead to a drop in the lender's pre-provisioning operating profit to ₹2,030 crore at the end of the December quarter.

Provisions may decline sequentially as the previous quarter had seen accelerated write-offs and increased provisions on the MFI book.

Credit costs are likely to improve by 85 basis points on a sequential basis to 2.2%-2.3%. The management had previously spoke about being cautious on this aspect, stating that it is too soon to expect a meaningful decline in credit costs over the next two quarters.

Strategy of the new management, asset quality within the MFI and vehicle financing segment, and progression on the Return on Assets (RoA) front will be monitored keenly by the street.

Shares of IndusInd Bank are trading 0.75% higher on Friday at ₹909.2. The stock is up 7% in the last one month.