Indian Bank — Q3 FY25 earnings call

Call held 29 Jan 2025

Management summary

Indian Bank reported a strong Q3 FY25, with net profit surging 34.57% YoY to ₹2,852 crore and global NIM expanding by 6 bps QoQ to 3.45%. Asset quality showed significant improvement, with GNPA and NNPA reducing to 3.26% and 0.21% respectively, alongside a declining slippage ratio. The bank maintained its credit growth guidance of 11-13% and continued its robust digital transformation, with digital channel business growing 125%.

Highlights

  • Net profit surged 34.57% YoY to ₹2,852 crore, with a QoQ growth of 5.36%.

  • Global NIM expanded by 6 bps QoQ to 3.45%, and 4 bps YoY.

  • Asset quality significantly improved, with GNPA at 3.26% and NNPA at 0.21%, alongside a declining slippage ratio of 0.78%.

  • Return on Assets (RoA) increased by 28 bps YoY to 1.39%, and Return on Equity (RoE) grew 108 bps YoY to 21%.

  • Digital channel business recorded a 125% growth over nine months, reaching ₹1,18,981 crore, demonstrating strong digital adoption.

Concerns

  • Wholesale deposit degrew from 1.08% to 1.01% QoQ, though management stated this was intentional to avoid high-cost deposits.

  • Corporate credit growth was noted by an analyst to be around 4-5% YoY, lower than the RAM segment, requiring significant Q4 disbursements to meet overall guidance.

Key financials

  1. Total Business 12.61 Tn +8.3%YoY
  2. Total Deposit 7.02 Tn +7.3%YoY
  3. Advances 5.59 Tn +9.6%YoY
  4. Net Profit ₹2,852 Cr +34.6%YoY
  5. NII ₹6,415 Cr +10.3%YoY
  6. Global NIM 3.5% +0.04%YoY
  7. ROA 1.4% +0.28%YoY
  8. ROE 21% +1.1%YoY
  9. Cost to Income Ratio 44.6%
  10. PCR 98.1%
  11. Credit Cost 0.47%
  12. EPS ₹84.7 +26%YoY
  13. Gross NPA 3.3%
  14. NNPA 0.21%
  15. Slippage Ratio 0.78%
  16. LCR 125%

What they filed

Q1 FY27: revenue up 11.1%, net profit up 10.1% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue15,348 15,759 15,856 16,283 16,590 +8%17,098 +8%17,480 +10%18,090 +11%
Net profit2,706 2,852 2,956 2,973 3,018 +12%3,061 +7%3,103 +5%3,273 +10%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • RAM (Retail, Agri, MSME)
    3.35 Tn Advances64.3% Share of Advances
  • Retail Advances
    15.8% Growth
  • Agriculture Advances
    13.5% Growth
  • MSME Advances
    8.2% Growth
  • CASA
    3.7% Growth40% Share of Deposits
  • Retail Term Deposit
    9% Growth
  • Digital Channel Business
    ₹1.19L Cr Value
  • e-deposits (digital deposits)
    ₹21,000 Cr Value
  • Total Gold Loan
    ₹90,000 Cr Value
  • Agri Gold Loan
    ₹78,000 Cr Value
  • MFI Book
    ₹1,244 Cr Value

Guidance & targets

Deposit Growth

  • Deposit Growth Deposit Growth · FY25 · High confidence 8% to 10%
    We have given deposit guidance of 8% to 10%. We will continue to do that.

    — Shri Binod Kumar, MD & CEO

Advances Growth

  • Advances Growth Advances Growth · FY25 · High confidence 11% to 13%
    We will achieve the advances guidance of 11% to 13%.

    — Shri Binod Kumar, MD & CEO

CASA Ratio

  • CASA Ratio CASA Ratio · FY25 · High confidence around 40%
    CASA, we have given guidance of around 40%. We have been able to maintain that and our endeavour will be to maintain CASA at 40%.

    — Shri Binod Kumar, MD & CEO

Credit to Deposit Ratio (LDR)

  • Credit to Deposit Ratio (LDR) Credit to Deposit Ratio (LDR) · FY25 · High confidence approximately 80%
    Credit to deposit ratio or LDR, we have given approximately 80%. We are at 79.63%. So, we have been able to maintain that.

    — Shri Binod Kumar, MD & CEO

Net NPA

  • Net NPA Net NPA · FY25 · High confidence less than 0.23%
    Net NPA, we have given guidance of less than 0.23%. We are at 0.21%.

    — Shri Binod Kumar, MD & CEO

Recovery

  • Recovery Recovery · FY25 · High confidence ₹7,000 crore
    Recovery, we have given guidance of Rs.7,000 crore, so far we have been able to recover Rs.5,800 crore. So, we are on track. We will be able to achieve that.

    — Shri Binod Kumar, MD & CEO

AUC Recovery

  • AUC Recovery AUC Recovery · FY25 · High confidence ₹2,000 crore
    AUC recovery, we have given guidance of Rs.2,000 crore. We have already recovered Rs.2,100 crore.

    — Shri Binod Kumar, MD & CEO

NIM

  • NIM NIM · FY25 · High confidence 3.40% to 3.50%
    NIM, we have given guidance of 3.40% to 3.50%. So, we are on that target.

    — Shri Binod Kumar, MD & CEO

ROA

  • ROA ROA · FY25 · High confidence approximately 1.20%
    ROA, we have given guidance of approximately 1.20%. We have beaten that. We are towards 1.39%.

    — Shri Binod Kumar, MD & CEO

ROE

  • ROE ROE · FY25 · High confidence 19% to 20%
    ROE, we have given guidance of 19% to 20% and we are at 21%.

    — Shri Binod Kumar, MD & CEO

Cost to Income Ratio

  • Cost to Income Ratio Cost to Income Ratio · FY25 · High confidence approximately 44%
    Cost to income ratio, we have given guidance of approximately 44% and we are at 44.56%.

    — Shri Binod Kumar, MD & CEO

Credit Cost

  • Credit Cost Credit Cost · FY25 · High confidence 0.77%
    Credit cost, we have given guidance of 0.77%, but we are at 0.47%.

    — Shri Binod Kumar, MD & CEO

Digital Spend

  • Annual Digital Spending Digital Spend · next 2-3 years · High confidence ₹1,200 crore
    Presently, you know Bank is spending around Rs.1,200 crore annually on the digital front and we will continue. One thing I can assure you exact amount that will depend on the requirement also what strategy we adopt going-forward. But this type of spending will keep on happening for say another two, three years at least because there are many projects in the pipeline.

    — Shri Binod Kumar, MD & CEO

Overseas Book Growth

  • Overseas Book Growth Overseas Book Growth · YoY and QoQ · High confidence 7% to 10%
    See, our overseas book is growing at a decent 7% to 10% we will continue that growth rate YoY and QoQ also.

    — Shri Binod Kumar, MD & CEO

What to watch in Q4 FY25

Corporate Credit Growth

next quarter (Q4 FY25)
Current Around 4-5% YoY (analyst observation), management states 8-9% (average)
Target 11-13% (implied by overall advances guidance)

Why it matters

Management is targeting significant corporate disbursements in Q4 to meet overall advances guidance, which is crucial for overall loan book growth.

Corporate we have a good pipeline of around Rs.40,000 crore in various stages... I am targeting Rs.40,000 crore and we will be able to achieve between 11% to 13%.

Risks & concerns

  • Achieving Q4 credit growth target

    medium

    Analyst expressed concern about the significant disbursement required in Q4 (₹38,500-40,000 crore) to meet the 11-13% credit growth guidance.

    Analyst acknowledged

  • Potential for SMA accounts to slip further

    low

    Analyst questioned if the increased SMA accounts were habitual, but management reassured that two of three large accounts are regularized and the remaining one in SMA 0 is expected to regularize, with no expectation of further slippage.

    Analyst downplayed

  • Margin pressure from higher corporate credit growth

    low

    Analyst asked if higher corporate growth would pressure margins, to which management stated they would be 'very cautious' and dissuade repo/EBLR linked loans for corporate to maintain NIM.

    Analyst acknowledged

Q&A highlights

8 direct
Achieving Q4 credit growth targets Direct
Corporate we have a good pipeline of around Rs.40,000 crore in various stages... I am targeting Rs.40,000 crore and we will be able to achieve between 11% to 13%.

Addresses analyst skepticism about achieving ambitious Q4 credit growth given past performance, highlighting corporate pipeline and RAM strength.

Asked by Ashok Ajmera

SMA 2 accounts and their habitual nature Direct
See these accounts are coming in SMA for some time like say 3 to 4 months. But out of these three two has come become regular completely not even in SMA 0. Only one account is in SMA 0, which we expect that will also become completely regular and going forward it is our expectation that they should not further slip to SMA.

Clarifies the nature of the increased SMA accounts, reassuring that most are regularizing and not expected to slip further, indicating contained asset quality risk.

Asked by Ashok Ajmera

Impact of new LCR norms and bank's preparedness Direct
But on an average our LCR remains in the range of in excess of 120%. Approximately 125% and impact of new norms are around 8 to 10 basis point. So, on particular day I cannot say. But we with 125%, even if there is a hit of 10 basis point then 115%, we will be able to maintain. I think that is comfortable.

Provides confidence in the bank's liquidity position and ability to meet potential new LCR norms without significant stress.

Asked by Piran

Deposit growth challenges and potential rate cuts Direct
I don't think there will be rate cut on the deposit front because if you see the bulk rate it is already very high. And I think it will continue to unless there is some rate cut is there.

Explains the bank's strategy regarding deposit pricing and its view on the interest rate environment, impacting cost of funds.

Asked by Mahrukh

Corporate credit growth and potential margin pressure Direct
Margin will be very cautious. As a philosophy we are dissuading giving loan on the repo rate loan or external benchmark linked loan, corporate book particularly, we will be cautious of the margin also.

Highlights the bank's strategic focus on maintaining NIM even while pursuing corporate credit growth, indicating a disciplined approach to lending.

Asked by Mahrukh

Reason for shedding bulk deposits Direct
Not any specific reason. Because may be not getting at our desired rate. Whatever we are looking for. Not any specific reason otherwise or not opportunity to invest it at desired rate. And for the management of the fund, we have been able to raise Rs.10,000 crore of infrastructure bond. So that is also a money fund for me. Since we have raised also Rs.10,000 crores. So, because of that also we went a little slow on the bulk side.

Clarifies that the reduction in bulk deposits was a conscious decision to manage cost of funds and was offset by other funding sources like infrastructure bonds.

Asked by Ashlesh

Status of co-lending business Direct
Co-lending, see, we are waiting for. We are in the process of having some complete end-to-end co-lending solution. Till that time, because subsequently there are many issues crop up regarding towards reconciliation. So, because of that we are waiting till we have a complete end to end solution for the co-lending only then we will go for co-lending.

Explains the temporary halt in co-lending due to operational challenges, indicating a cautious approach to partnerships.

Asked by Dixit

Contribution of Fintech partnerships to retail/MSME loans Direct
No, it is not basically this fintech partnership. Basically, it is for government department. Basically, it gives us the collection. So, this government and Fintech department when we started almost three years back, we have got close to Rs.15,000 crore to Rs.20,000 crore of the present balance in those accounts.

Clarifies the primary role of fintech partnerships, which is currently focused on government collections rather than direct retail/MSME loan growth, providing clarity on digital strategy.

Asked by Sushil

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Detailed narrative

Strong Financial Performance in Q3 FY25

Indian Bank delivered robust financial results for Q3 FY25, with net profit surging by 34.57% YoY to ₹2,852 crore and a sequential growth of 5.36%. Net Interest Income (NII) also saw a healthy increase of 10.32% YoY to ₹6,415 crore. The bank's Global Net Interest Margin (NIM) improved by 6 basis points QoQ to 3.45%, reflecting effective asset-liability management. Return on Assets (RoA) increased by 28 basis points YoY to 1.39%, and Return on Equity (RoE) stood strong at 21%, growing 108 basis points YoY.

Significant Improvement in Asset Quality

Asset quality continued its positive trajectory, with Gross Non-Performing Assets (GNPA) reducing by 22 basis points sequentially and 121 basis points YoY to 3.26%. Net Non-Performing Assets (NNPA) also saw a substantial decline to 0.21% from 0.27% in the previous quarter and 0.53% a year ago. The slippage ratio consistently improved, falling to 0.78% in Q3 FY25 from 1.06% in September and 1.5% in June, supported by strong recoveries of ₹1,911 crore against slippages of ₹1,016 crore.

Credit Growth Driven by RAM Segment

Total advances grew by 9.61% YoY and 1.60% QoQ to ₹5.59 trillion. The Retail, Agriculture, and MSME (RAM) segment was a key growth driver, expanding by 12.79% YoY to ₹3.35 trillion, with retail advances growing 15.80%, agriculture 13.50%, and MSME 8.20%. The share of RAM in the total loan book increased to 64.35% from 63.32% in September 2024. Management expressed confidence in achieving the overall advances growth guidance of 11-13% for FY25, citing a corporate pipeline of approximately ₹40,000 crore.

Strategic Deposit Management and CASA Focus

Total deposits grew by 7.34% YoY to ₹7.02 trillion. The bank maintained its CASA (Current Account Savings Account) share at 40%, with CASA growing by 3.70%. Retail term deposits showed a decent growth of 9%. Management indicated a deliberate strategy to de-grow wholesale deposits from 1.08% to 1.01% to avoid high-cost funds, while also raising ₹10,000 crore through infrastructure bonds to support funding needs.

Accelerated Digital Transformation

Indian Bank's digital journey continued to advance, with digital migration increasing from 87% to 92% YoY. Digital channel business witnessed a remarkable 125% growth over nine months, reaching ₹1,18,981 crore. Digital adoption in RAM was strong, with MSME at 80%, Retail at 77%, and Agri at 88%. The bank has launched 39 new digital journeys this fiscal year, bringing the total to 117, and has onboarded close to 138 Fintech partners, primarily for government department collections.

Prudent Provisioning and Capital Adequacy

The Provision Coverage Ratio (PCR) stood at a healthy 98.09%, up 219 basis points compared to December 2023. The bank maintained a prudent approach to provisioning, making additional provisions for segments or accounts showing signs of stress, including 10% for SMA 2 accounts and 25% for restructured accounts. The Liquidity Coverage Ratio (LCR) was reported at 125% presently, with management confident of maintaining it above 115% even with potential new regulatory norms.

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