Credit risk

IndusInd Bank – Credit risk increases further, margin under pressure: Systematix

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Systematix Research Report

Our readings of the FY22 annual report of IndusInd Bank Ltd. show that the credit mix of its corporate and commercial businesses grew at a faster rate than the consumer credit division. We believe most of the incremental credit growth in CCB was for large corporate working capital loans (read higher cash credit mix).

The resulting margin erosion in this business was offset by the higher mix of unsecured credits in the consumer credit division. IndusInd Bank moved slowly in the merchant banking and micro-lending segments, due to higher stress levels.

Importantly, fixed income markets are indicating an increase in the credit risk spread between five-year AAA-rated paper and the corresponding G-Sec yield to maturity, which is currently at its highest. high level over three years. The difference between the yields of BBB-rated papers of similar maturity and those of AAA-rated papers has also reached an all-time high over the past 16 years.

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