IndusInd Bank returns to profit post FX derivatives hit, says on track to pick CEO

Mint

4 days ago

Mumbai: IndusInd Bank, still reeling from its ₹ 2,000-crore derivatives hit and a string of top-level exits, is making headway in appointing a new chief executive officer (CEO), even as it returns to profit and sharpens focus on its key agenda that includes cost control, chairman Sunil Mehta said in an analysts' call on Monday.
Mehta said the bank has not revised its CEO recommendations submitted to regulators and is actively scouting top-tier talent, both internally and externally, for senior management roles.
The bank had earlier shortlisted three candidates for the top position, including Rajeev Anand from Axis Bank. This comes amid recent senior-level exits, including the resignation of chief human resources officer Zubin Mody last Friday, following the departure of CEO Sumant Kathpalia and Deputy CEO Arun Khurana in the wake of the bank reporting its ₹ 2,000 crore derivative losses.
In March this year, IndusInd Bank disclosed a ₹ 2,000-crore hit due to mis-accounting in foreign exchange derivatives that amounted to about 2.35% of its net worth. The shocking disclosure exposed risk control lapses and triggered regulatory action and senior management exits.
Referring to the private sector bank's June quarter results, Mehta said IndusInd will follow a profitability-first approach and will look at containing the year-on-year (y-o-y) operational expense growth to a single digit that helped the private lender return to profitability, albeit 72% lower y-o-y.
The private sector lender has reported net profit of ₹ 604.07 crore for April-June, as against a loss of ₹ 2,328.9 crore in the previous quarter.
'We have taken measures such as reduction in savings account rate, de-emphasizing growth in lower return businesses through effective transfer pricing to restore the profitability of the organization towards its underlying potential,' said Mehta. 'The bank had over 20% OPEX CAGR in the last three years and we are now working towards containing OPEX to a single digit year-on-year growth in the foreseeable future.'
Mehta also said the bank will be cautious in growing its microfinance book, as it reported slippages worth ₹ 880 crore during the quarter. The overall bad loan slippages were at ₹ 2,567 crore in Q1, half the quarter-ago number of ₹ 5,104 crore.
IndusInd Bank said it is looking to moderate its corporate loan book growth, as it will focus on scaling up the granular mid- and small-corporate portfolio.
The bank's loan book saw a 4% degrowth y-o-y to ₹ 3.33 lakh crore, while the deposit growth was flat.
The core income or net interest income fell by 14% from a year ago to ₹ 4,640 crore in the June quarter as against ₹ 5,408 crore in the corresponding quarter last year. The net interest margin improved to 3.64% from 2.25% in the previous quarter, owing to lower cost of deposits on the back of cut in rates, particularly for savings accounts, and the higher overall retail loan mix.
The bank's fee income fell 35% to ₹ 1,532 crore during the reporting quarter as against ₹ 2,348 crore a year ago. Fee income was hit by subdued corporate activity and lower disbursements by microfinance institutions.