IndusInd Bank profit jumps 22% on strong retail loan demand

By Siddhi Nayak and Dimpal Gulwani

(Reuters) -Indian private lender IndusInd Bank reported a 22.1% rise in second-quarter profit on Wednesday, helped by strong loan growth on the back of retail borrowing, with the upcoming festive season expected to further boost customer spending.

Net profit rose to 21.81 billion rupees ($262.00 million) in the three months ended Sept. 30 from 17.87 billion rupees a year earlier.

Net advances in the quarter jumped 21% year-on-year with retail loans growing by 25%. Deposits grew 14%.

Most Indian lenders have shored up their deposit base to keep up with healthy loan demand and tightened liquidity conditions.

"Economic activity is expected to pick up pace with upcoming festive demand and robust consumption," CEO Sumant Kathpalia said in a release.

The festive season in India starts in October around Diwali - when it is traditional to invest in new property, cars or other big ticket items - and lasts till Christmas.

IndusInd's net interest income rose 18% on-year to 50.77 billion rupees while provisions and contingencies were down 14.7% to 9.74 billion rupees.

Net interest margin (NIM), an indicator of a bank's profitability, rose to 4.29% from 4.24% a year earlier.

Kathpalia said he expects NIMs to be between 4.2%-4.3% in 2023.

Gross bad loans as a percentage of total loans - a measure of asset quality - eased to 1.93% at the end of September, from 1.94% at the end of June.

Kathpalia said the bank will be "conservative" about giving out personal loans since it has an 11% exposure to the risky microfinance sector. The RBI has been cautioning lenders about nascent stress in the personal loan segment.

IndusInd will not be selling bad loans in the microfinance portfolio to asset recast companies and will be focusing on recoveries and upgrades, Kathpalia said, adding that the bank does not see the need to raise capital for now.

($1 = 83.2440 Indian rupees)

(Reporting by Dimpal Gulwani in Bengaluru and Siddhi Nayak; Editing by Janane Venkatraman and Nivedita Bhattacharjee)