Induslnd Bank hits lower circuit over falling deposits concern

Shares of Induslnd Bank were locked at a lower circuit of 20 per cent on Tuesday over concerns regarding the bank’s falling deposit base and asset quality due to the rapid spread of Coronavirus.

In an investor’s presentation, the bank said that the deposits had fallen by 10 to 11 per cent after a state withdrew funds. Approximately 70 per cent of the deposits were lost from the government’s side while, the rest was lost on the corporate side. The bank also added that this may also result in a lower CASA ratio. However, it reassured investors saying that the retail deposits have remained stable.

The bank has been particularly affected due to the impact of the lockdown as it is diversified in segments, which are directly linked to the economy, from lower-end segments like MFI/MSME to retail, especially vehicles and large corporate.

The management also indicated that the outbreak of the virus could push credit cost to around 200 to 210 basis points in the quarter ended March 2020 due to a rise in bad loans. Though the bank will be using three-month moratorium window announced by RBI, it would see some bad loans or non-performing assets in Q4 from other accounts (apart from the ones impacted due to COVID-19). As a result, the bank aims to increase its provision coverage ratio (PCR) to 60 per cent going forward, from around 53 per cent in the quarter-ended December 2019. It also aims to maintain a high threshold for CET1 capital.

At 12.45 pm on Tuesday, the stock was trading at Rs 359.10, down by 12.74 per cent or Rs 52.45 per share. The 52-week high is recorded at Rs 1,822.15 and the 52-week low is Rs 235.60 on BSE.