By Siddhi Nayak and Nandan Mandayam
(Reuters) -Indian private lender IndusInd Bank will report a profit for the fourth quarter and the full financial year 2025, its CEO told CNBC-TV18 on Tuesday, after discrepancies in its derivatives accounts sent its shares tumbling.
“I think we have provisions, which we have created over a period of time, and I think our businesses are doing well,” Sumant Kathpalia told the local business news channel.
“I think we manage our expenses very well…(and) we should come back to our profitability.”
On Monday, the bank flagged a 2.35% hit to its net worth as of December 2024 due to an underestimation of hedging costs related to some past forex transactions.
The hit is valued at 15.20 billion rupees ($174.4 million), Kathpalia told the broadcaster.
Until the Reserve Bank of India’s new investment norms kicked in from April 1, 2024, banks’ asset liability management (ALM) and treasury desks could do internal swaps, where typically one cash flow is exchanged for another.
When an early termination of such deals happened, the profit got accounted for, while the loss did not, Kathpalia said, explaining the nature of the discrepancy.
The impact of discrepancies should be limited to the January-March quarter, after which it will be “business as usual” for the bank, he added.
Analysts at Macquarie said in a note that the issue “raises questions on internal processes”, while Jefferies said “it clearly reflects weak internal controls”.
Jefferies expects a one-time hit to the lender’s 2024-25 earnings and a likely “derating” for the stock.
The private lender’s shares slid 27% on Tuesday, their biggest-ever decline, and settling at their lowest level since November 2020.
The decline wiped out about 190.52 billion rupees ($2.18 billion) in market capitalisation.
The Mumbai-based lender is already grappling with weak earnings and a shorter-than-requested extension for CEO Sumant Kathpalia, which could prompt uncertainty.
Earlier in the day, chairman Ashok Hinduja told news channel ETNow that IndusInd International Holdings, Mauritius, the lender’s promoter, was ready to infuse liquidity into the bank if the need arises. Promoter is an Indian market term for large shareholders.
IndusInd Bank is comfortable with its liquidity position and expects its key capital ratio to be above 15% despite the one-time hit due to the discrepancy, Kathpalia said, adding that the lender will not need to raise capital for four quarters.
($1 = 87.1370 Indian rupees)
(Reporting by Siddhi Nayak in Mumbai and Nandan Mandayam in Bengaluru; Additional reporting by Jaspreet Kalra and Dharamraj Dhutia; Editing by Mrigank Dhaniwala and Eileen Soreng)
