The Merging of IndusInd Bank and Kotak Mahindra Bank is termed as “Purely Speculative”

The Merging of IndusInd Bank and Kotak Mahindra Bank is termed as “Purely Speculative”

By: Ashwathy Nair

The merger of a private lender, IndusInd Bank Ltd with bigger rival Kotak Mahindra Bank Ltd was called “purely speculative”. The comments on the merger came forward on the day when IndusInd Bank posted a 53 per cent (y-o-y) year-on-year drop in its net profit in the September quarter to 647 crores, while the figure exceeded street expectations.

Sumant Kathpalia, the chief executive (CEO) of IndusInd Bank said, “I will not comment on speculations, but it can be assured that there are no such talks with the promoter, who have themselves clarified”. All this came after a report that stated, Kotak Mahindra Bank is in talks to acquire IndusInd Bank.

The bank’ promoter, IndusInd International Holdings Ltd, said that it “totally denies about the said rumour and it is considered malicious, untrue, and baseless”. “IIHL is the one that the Hindujas and a wide-ranging base of other successful non-resident Indians are supporting. As per the statement that came from the promoters, for IndusInd Bank, they reiterate their full support, no and always”.

The fiscal second-quarter profit of IndusInd Bank exceeded the ₹611.5 crore estimate in a poll of 15 analysts. Quarterly profit was hit by a more than doubling of overall provisions to around ₹1,964 crores. In the fiscal second quarter, Net Interest Income (NII), the difference between interest received and spent, rose 12.6 per cent y-o-y to ₹3,278 crores. A primary indicator of profitability, the bank’s Net Interest Margin (NIM) stood at 4.16 per cent, down 12 basis points (bps) sequentially and up 6 bps y-o – y. Rest of the income or non-interest income fell 10 per cent to ₹1,554 crores.

Kathpalia said that the bank is defining the restructured accounts that will continue until the end of December regarding the recast of stressed assets due to the pandemic. “It would be inappropriate to give any such number as of now and we assume that this will be in low single digits. There are some questions, but not major ones”, he said.

With bad loans as a percentage of total loans at 2.21 per cent, down 2 bps y-o-y, IndusInd Bank’s asset quality was largely unchanged in Q2. The net bad credit ratio of loan stood at 0.52 per cent.

If not declared so by 31 August, On 3 September, the Supreme Court ordered a temporary stay on the classification of bad loans, and banks are expected to use this relaxation in Q2 or until the final orders are passed. The Pro-forma gross Non-Performing Asset (NPA) and net NPA ratio of the bank would have been 2.32 per cent and 0.61 per cent, respectively, it had such an order that has not been passed.

“The degree to which the bank’s activities and financial results would be impacted by covid-19 depends on potential developments, which are highly uncertain”, the bank said.