Indusind Bank Ltd (INDUSINDBK) Q2FY27 Concall Transcript - Sep-2026 Qtr
Moderator: Good evening, ladies and gentlemen. You are connected to the IndusInd Bank conference call. This conference will begin shortly. We request you to please stay with us. Thank you for your patience. Participants, this conference will begin shortly. We request you to please stay connected, and thank you for your patience.
Moderator: Ladies and gentlemen, good evening and welcome to IndusInd Bank Limited Q2 FY '27 earnings conference call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing "*" then "0" on your touchtone phone. Everyone is requested to kindly limit their questions to a maximum of two per person. I now hand the conference over to Mr. Rajiv Anand, Managing Director and CEO of IndusInd Bank. Thank you and over to you, Mr. Anand.
Rajiv Anand (Indusind Bank Ltd): Good evening everyone and thank you for joining us today. I'm joined by our EDs Jagdeep and Ganesh, our CFO Viral, and our head of investor relations and strategy, Indrajit. I will start with the operating environment and then cover our progress on the bank's strategic priorities. During the quarter, global markets faced renewed geopolitical tensions and higher energy prices. India's growth momentum by contrast stayed resilient backed by strong economic activity and sound macroeconomic fundamentals. Banking system liquidity improved meaningfully helped by FCNR(B) deposit flows and credit demand continues to strengthen. Together, these conditions have created a constructive environment for the banking industry. Against this backdrop, the bank has delivered a healthy operating profit performance. Growth momentum picked up and we kept a prudent approach to risk and liquidity. We also made further progress on our strategic priorities with better asset quality, a stronger balance sheet mix, and higher profitability. These results show the benefits of the disciplined action we have taken over the last several quarters. I will now cover the key highlights of Q2 FY '27, followed by business-specific progress and financial performance. Retail deposits grew sharply during the quarter, helped by FCNR(B) mobilization and asset growth picked up across both retail and corporate segments. As a result, deposits and advances have returned to double-digit growth at 10% and 11% Y-o-Y respectively, compared with the decline last year. Under the F under the RBI swap window, we mobilized $3.51 billion of FCNR(B) deposits. This implies a market share of 2.75%, well above our natural market share of about 1. 1.5% on overall deposits. It is also meaningfully meaningful relative to our own size at 6.3% of our Q2 average deposit book and was supported by a relatively higher share of retail and non-leveraged deposits reinforcing the quality of our funding profile. On the asset side, retail growth was robust at 12% Q-on-Q, overall at 4% Q-on-Q, excluding FCNR(B)-related lending. Disbursements accelerated across vehicle, rural, and traditional retail. The wholesale book kept its momentum, growing 10% Q-on-Q, while the portfolio under mid-market and SME segments also witnessed healthy 13% Q-on-Q growth. Asset quality improved across all subsegments. Annualized gross slippage fell to 1.8% from 2.1% Q-on-Q and 3% Y-o-Y. Our continuous focus on recoveries ensured a larger improvement in net slippages, which fell to 1.1% from 1.5% Q-on-Q and 2.5% Y-o-Y. The outstanding stressed book has declined with gross and net NPAs improving to 2.73% and 0.83% respectively. Residual stress indicators remain negligible. Net security receipts are at 0.03%, and SMA-1 and 2 combined is at 0.05%. We resumed expanding our physical distribution footprint, adding 124 outlets primarily within BFIL. With business momentum picking up, we plan to add about 100 bank branches in H2, expanding into underpenetrated geographies and reaccelerating growth in select markets where expansion had previously moderated. In parallel, we strengthened our frontline capacity by adding around 4,300 employees at at the overall bank level, largely in sourcing sourcing roles. These investments in distribution reach and sales capacity position us well to support future growth. Our generative AI initiatives continue to see strong employee adoption. More than 50% of our employees now use AI chatbots
Rajiv Anand (Indusind Bank Ltd): and over half of the active users use them daily with satisfactory outcomes. AI-assisted productivity is steadily becoming a part of day-to-day work across the organization. We have also expanded our conversational AI program with six voice bot programs launched and a further 12 customer and employee journeys identified within the roadmap. These programs are helping validate use cases, user adoption patterns and operational benefits while creating a pipeline for broader deployment. We had set an ambiti- we had set an ambition of of a 1% exit RoA for this year and we are making clear progress. Q2 RoA improved to 0.87% compared to a normalized 0.63% in Q1 despite temporary margin pressures from FCNR(B) mobilization. Pre-provision operating profit rose to 2,874 crores, up 15% on a on the normalized previous quarter. Robust business growth and healthy fee income drove the increase while disciplined ba- balance sheet management contained the margin impact of FCNR(B)-related liquidity. Provisions declined 12% QoQ and 54% YoY, reflecting sustained improvement in asset quality and lower fresh stress. As a result, profit after tax rose to 12- to 1,242 crores. This is up 51% QoQ on a normalized previous quarter against a loss a year ago. Capital ad- adequacy remains healthy with CET1 at 15.55% and overall capital at 16.59%, giving us ample capacity to support growth. I will now take you through individual businesses starting with retail, followed by wholesale. Viral Viral will then cover the financial summary. On the retail deposits, our deposit franchise is anchored by a wide distribution network, strong segment-led propositions, a comprehensive product suite and a capable workforce. Over the last few quarters, we have further strengthened our liability franchise through targeted senior and middle-level leadership hires, greater integration across branches, across branches, Affluent and NRI banking teams, and enhancements to digital onboarding and acquisition journeys. During the quarter, we mobilized $3.5 billion of FCNR(B) deposits under the RBI swap scheme. This shows the strength of our NRI franchise and our ability to seize market opportunities through sharp execution. We used these inflows prudently to improve the quality of our liabilities. Part of the proc- proceeds replaced high high-cost bulk funding, which brought CDs down to 3.3% of deposits from 5.9% QoQ. Our deposit mix con- deposit mix continues to improve. On an end of period basis, retail deposits as defined under LCR grew 11% QoQ and rose to 50% of total deposits. Customer acquisition gained momentum with nearly 3.6 lakh new-to-bank accounts opened during the quarter, up 12% QoQ, supported by a stronger customer proposition and a more productive distribution. Cost of deposits was 5.96% compared to 5.93% QoQ. While both savings and term deposit costs repriced downwards, the marginal increase came from lower CASA mix due to the FCNR(B) mobilization. The FCNR(B) window gave a strong boost to our Affluent and NRI banking. These segments now hold around 1,05,000 crores of deposits, up 23% QoQ. We also added SIF offerings to our approved product suite, giving clients access to more sophisticated investment solutions and strengthening our wealth proposition. We continue to strengthen our customer proposition through selective launches and partnerships, a partnership with Navi UPI to strengthen digital payments, a partnership with J.P. Morgan Payments to launch Expedite, our cross-border remittance solutions, new customer features, Secure Deposit and SafeBuddy on on INDIE to enhance security and trust. Going forward, we will focus on improving CASA, increasing the retail deposit share, and optimizing the cost of deposits. We will do this through deeper engagement with retail, Affluent, NRI, senior citizens and SME customers, supported by digital, AI and data capabilities. Moving to retail assets, let me start with Vehicle Finance. Our Vehicle Finance portfolio crossed the 1 lakh crore milestone this quarter. Book now stands at 1,00,651 crores, up 5% YoY and 1% QoQ. Disbursements picked up to 11,968 crores, up 17% YoY
Rajiv Anand (Indusind Bank Ltd): and 10% Q-on-Q. As we said on earlier calls, we have been cautious on tractors and two-wheelers, excluding these two segments, vehicle dispersal grow grew even stronger at 24% Y-o-Y and 14% Q-on-Q. The disbursement growth was driven by commercial vehicles, which grew 32% Y-o-Y and 17% Q-on-Q, and passenger vehicles at 13% Y-o-Y and 12% Q-on-Q. Asset quality remains stable backed by disciplined underwriting and collections. Annualized net slippage fell to 1.67%, down 34 basis points Q-on-Q and 30 basis points Y-o-Y, and the overdue book stayed within our operating range. Looking ahead, festive demand and seasonality should support growth in the second half. We, however, remain watchful of macro-economic trends, especially around fuel prices, affordability considerations, and monsoon-related develo- developments across markets. Our focus remains on profitable growth, gaining market share in our chosen segments, and deepening customer relationships through cross-sell across the wider Retail Bank. Our rural banking franchise continues to improve across the board in both disbursements and asset quality. The microloan business returned to growth after nearly eight quarters of decline. The portfolio grew 8% Q-on-Q to 17,571 crores on disbursements of 6,548 crores, up 25% Q-on-Q. Asset quality improved further, reinforcing our confidence in the underwriting changes made last year. Annualized net slippage on microfinance loans fell to 2.2% from 3.4% Q-on-Q and 14.1% Y-o-Y. The 31 to 90 DPD fell to 0.4% from 0.6% Q-on-Q and 3.2% Y-o-Y. Around 89% of the portfolio is now covered under C- CGFMU guarantee scheme, including disbursements whose cover is currently being processed. Beyond microfinance, our diversification in- initiatives continue to scale. The merchant finance portfolio grew 20% Y-o-Y and 7% Q-on-Q to 8,694 crores, serving nano-retailers across more than 550 cities. Merchant finance now contributes 33% of loans originated by BFIL versus 25% Y-o-Y. Affordable housing grew 18% Y-o-Y, while KCC and other rural roles, rural loans remain stable Q-on-Q. Rural banking remains an important franchise both for profitability and priority sector lending. Having strengthened underwriting and operating processes in the microfinance, we have resumed growth in a calibrated manner and expect to build on this momentum as we enter the seasonally strong second half. At the same time, we continue to man- monitor potential risk from drought conditions in a few states, fuel and inflation trends across the next next state elections, and we will calibrate our growth strategy accordingly. Building on the momentum of the first quarter, traditional consumer banking assets witnessed further acceleration in growth during the quarter. Excluding FCNR(B) related loans, the consumer loan book grew 7% Q-on-Q to 59,776 crores, led by healthy traction in secured retail and MSME. We continue to scale our secured retail and MSE fra- MSME franchises, while maintaining a selective approach towards unsecured lending. Our home loan book grew 39% Y-o-Y and 12% Q-on-Q to 7,733 crores. Within S- SME, Small Business Banking grew 10% Q-on-Q to 10,523 crores. Loan against property grew 7% Q-on-Q to 14,407 crores. Both reflect encouraging traction in our focus segments. On the unsecured side, origination trends improved, but we continue to put portfolio quality and risk-adjusted returns ahead of volume. As a result, th- the credit card portfolio declined 3% Q-on-Q and the PL portfolio declined 2% Q-on-Q. With new originations improving, we expect both CC and PL books to return to growth in the next few quarters. Asset quality improved further during the quarter with annualized net slippage of 3.3% versus 3.7% Y-o-Y and 3.5% Q-on-Q. Over the last several quarters, we had strengthened our leadership team and invested in distribution, analytics and technology. That work is now shape- is now showing in better momentum across our business focus businesses. Mortgages, gold loans, LAP, and small businesses are contributing a growing share of incremental growth and diversifying the loan portfolio. These businesses are central to our strategy of building a more granular, balanced, and resilient Universal Bank.
Rajiv Anand (Indusind Bank Ltd): Coming to the wholesale bank, wholesale bank sustained last quarter's momentum with loan book growing 10% Q-on-Q and Y-o-Y. The commercial and mid-market group grew fastest at 13% Q-on-Q. Large corporate and institutional banking both grew 8% Q-on-Q. Growth was well-diversified across sectors, including NBFCs, metals, transport, automobiles, digital services and gems and jewelry. Customer acquisition strengthened with new to bank credit relationships of 43% Q-on-Q. This was supported by continued expansion in commercial and mid-market, supply chain finance, and corporate banking. Fee momentum stayed healthy. Wholesale bank fees rose to 446 crores, up 37% Y-o-Y and 9% Q-on-Q with transaction banking contributing 52% of the fees. Transaction banking continues to scale and deepen client relationships. We saw healthy momentum in trade finance, cash management, capital markets, and government banking businesses to support growth both in fee and liabilities. The share of customers rated A and above in the wholesale portfolio was at 76% remaining steady on a Q-on-Q basis. Asset quality remains robust. Annual gross slippage fell to 0.07% and net slippage was negative because of recoveries and upgrades which exceeded fresh slippages. Going forward, we will focus on scaling commercial and mid-market supply chain finance and transaction banking on deepening relationships across corporate, institutional and government clients. We will drive higher penetration of trade and cash management and capital market solutions, strengthen our self-funding relationships and stay disciplined on risk. This will support sustainable growth and higher fee intensity. Let me now hand over to Viral to take you through the financial performance.
Viral (Indusind Bank Ltd): Sure. Thank you, Rajiv. So as usual, I will start with the balance sheet and then move to the profit and loss account. So on the balance sheet, excluding FCNR(B) related advances, the average advances book grew 6% quarter-on-quarter, driven by better momentum in both retail and wholesale. Including the FCNR(B) related loan the average advances grew 9% sequentially. Average deposits grew 7% quarter-on-quarter supported by FCNR(B) mobilization, while we continue to reduce certain wholesale deposit balances. The average credit-to-deposit ratio was 84% compared to 83% in Q1 FY '27. Average borrowings rose to 9% of total liabilities up from 8% up from 8% Q-on-Q, mainly because of the FCNR(B) related foreign currency borrowings. On P&L, net interest income was Rs. 4,569 crores, which is up 4% Q-on-Q on a normalized basis. Net interest margin was 3.23% compared with a normalized 3.35% in the previous quarter. The 12-basis moderation was mainly due to FCNR(B) mobilization. About half came from the FCNR(B) deposit related balance sheet expansion and then the rest from other changes in the balance sheet. Non-interest income was Rs. 2,248 crores, up 26% quarter-on-quarter, supported by strong business momentum and healthy treasury income. Operating expenses were Rs. 3,943 crores, up 7% quarter-on-quarter. This increase reflects higher business volumes, growth-related spends, and marketing and brand building initiatives. So as a result, pre-provision operating profit was at Rs. 2,874 crores, up 15% quarter-on-quarter on the normalized previous quarter. Provisions and contingencies were Rs. 1,223 crores, down 54% year-on-year and 12% Q-on-Q, and that was driven by lower net slippages. In line with our policy, we wrote off loans of Rs. 1,671 crores during the quarter. Moving on to asset quality, GNPA and NNPA both improved Q-on-Q to 2.73% and 0.83% respectively, with the PCR at 70%. Net slippages have improved sequentially with decline across segments. Segment-wise NPA movements are presented on slide 24 of the presentation. The SMA-1 and 2 book was 5 basis, and that compares with 12 basis quarter-on-quarter. Net security receipts fell to 3 basis points of total assets, compared with 4 basis points in the prior quarter.
Viral (Indusind Bank Ltd): went up by 6 basis points quarter-on-quarter. Restructured advances have also come down by four basis points to five basis points of the loan book. On profitability and capital, a profit after tax was 1,242 crores and that compared with a normalized 824 crores in the previous quarter. The normalized ROA therefore improved to .87% from .63 % and that reflects continuing progress in profitability and asset quality. The bank's capital and liquidity remained healthy with CET1 at 15.55 and CRAR at 16.59% and the LCR at 127%. Let me now hand back to Rajiv for his closing comments.
Rajiv Anand (Indusind Bank Ltd): Q2 reflects the growing strength of the franchise and the progress we made in rebuilding momentum across the bank. Growth has strengthened, profitability has improved, and asset quality trends remain encouraging, and our funding profile is becoming more granular and resilient. These outcomes are underpinned by the work we have done over the past year to strengthen our leadership team, enhance governance and risk standards, and invest in technology and operating capabilities. It is particularly encouraging to see our retail growth engines gaining traction. Secure retail, MSME, and microfinance are contributing to stronger business momentum, while our liability franchise continues to improve through a higher share of granular retail deposits and reduced reliance on wholesale funding. As we enter the second half, our priorities remain clear: accelerating high-quality growth, strengthening our deposit franchise, deepening traction transaction banking and fee incomes, and continuing the normalization of credit cost. We will continue to leverage technology, data, and AI to enhance customer experience, productivity, and scalability. The work of strengthening the franchise is translating into results. With stronger fundamentals, healthy capital and liquidity, and momentum building across the business, we're entering the second half with confidence and a clear focus on delivering sustainable growth, stronger profitability, and improved returns over time. With this, we can now open the line for communication for for questions. Thank you, and over to you.
Moderator: Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the Touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to please use handsets while asking a question. Everyone is requested to kindly limit their questions to a maximum of two per person. Ladies and gentlemen, we will now wait for a moment while the question queue assembles. Our first question comes from the line of Rikin Shah with IIFL Capital. Please go ahead.
Rikin Shah (IIFL Capital): Hi, good evening and thanks for the opportunity. I had six questions, just pace them out. First one, you know on the loan side, the average growth momentum has clearly improved and so has the disbursement in vehicle and MFI loans. The question is that while you have mentioned to grow loans in line with the system in the past, it is still trailing the system loan growth which presumably is running ahead of your expectations. So just wanted to get a sense on the growth outlook hereon. That's my first question.
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