IndusInd Bank Shares Tank 20% | IndusInd Bank CEO On The Accounting Lapse | Exclusive | CNBC TV18

Summary

In this interview, Su Katalia, a key bank figure, discusses the bank's strategies for improving profitability, risk management, and domain expansion. The bank plans to reduce its cost of deposits, regain financial strength, and maintain a stable risk cost range. They are focusing on domain expertise in affordable housing and lending, alongside technological investments for growth. Despite ongoing challenges, including a projected loss of ₹1520 crores, the bank is confident that it will turn profitable in the fourth quarter, driven by released provisions and a stabilizing loan book. The leadership reassures investors of the bank's solid foundation and transparency.

Takeaways

• 😀 The bank is focused on reducing deposit costs and becoming more competitive with the large four banks.
• 😀 Financial metrics are expected to improve, with profitability anticipated to rise from the first quarter onward.
• 😀 Risk costs are forecasted to stabilize within the range of 110 to 130 basis points.
• 😀 The bank plans to add domain expertise, particularly in affordable housing and lending, to strengthen its portfolio.
• 😀 The unsecured loan book, including personal loans and credit cards, is performing well, with credit card flows stabilizing at an elevated level.
• 😀 Regulatory changes have impacted credit card profitability, especially in revolving rates and late fee charges.
• 😀 The bank's credit growth stands at 12.2%, and while margins may face temporary suppression in the short term, they expect margins to stabilize at 4% or above in the long term.
• 😀 Investor confidence has been affected, but the bank assures transparency and no hidden losses are being concealed.
• 😀 The projected loss for the quarter is ₹1520 crore, but releasing provisions from microfinance could potentially turn the quarter profitable.
• 😀 The bank is confident in its ability to return to profitability within the next two to three quarters, with a target return on assets (ROA) of 1.5% to 1.8%.

Q & A

What is the first priority for the bank according to Su Katala?

The first priority for the bank is the granularization of liabilities, which involves reducing the cost of deposits and making the bank more competitive, especially in comparison to the large four banks in the industry.

How does Su Katala predict the bank's profitability will evolve over the next few quarters?

Su Katala believes that the bank will start seeing profitability from Q1, with a significant uptick in profitability expected by Q3 or Q4. The bank is aiming for a 'hockey stick' growth in its performance.

What is the expected range for the bank's risk costs?

The bank's risk costs are expected to stabilize within the range of 110 to 130 basis points as the bank works to fortify its balance sheet.

What new domain expertise does the bank plan to add?

The bank plans to add expertise in areas like affordable housing and lending. It views lending as a key domain to enhance and establish itself as a domain expert.

What was the gross and net loss that the bank is currently forecasting?

The bank is forecasting a gross loss of around ₹1,970 crores and a net loss after taxes of ₹1,520 crores due to discrepancies in accounting for hedges, specifically in the microfinance sector.

How is the bank's unsecured business performing?

The bank's unsecured business, including credit cards and personal loans, continues to perform well. The personal loan book is growing, and while credit card profitability was impacted by regulatory changes, flows in the credit card business have stabilized at elevated levels.

What is the current credit growth reported by the bank, and what is the outlook?

The bank has reported a credit growth of 11-12%, and the outlook for the next quarter is positive, with continued demand for credit expected. The bank also expects to see margins stabilize and potentially rise above 4% in the coming 12 months.

How does Su Katala view the current state of the bank's performance?

Su Katala believes that the bank is fundamentally strong, with domain expertise that positions it as a market leader. Despite recent challenges, he is confident that the bank will return to profitability, particularly once the microfinance issues and other hurdles are behind them.

What message did Su Katala have for investors following the bank’s recent performance?

Su Katala's message to investors is that the bank is solid and transparent, with no hidden losses or issues. He believes the bank is on track to return to profitability in the near future, and investors should remain confident in its recovery and growth.

Is there a possibility for the bank to report a profit in the fourth quarter?

Yes, despite the ongoing provisions for microfinance-related losses, the bank may report a profit in the fourth quarter, which represents a positive update for investors.