(Reuters) -India’s IndusInd Bank reported a surprise 39% decline in second-quarter profit on Thursday, missing market estimates, as it set aside more funds to cover bad loans.
The private lender posted a net profit of 13.25 billion rupees ($157.7 million) for the three months ended Sept. 30, compared to 21.81 billion rupees a year earlier.
Analysts, on average, were expecting a profit of 22.08 billion rupees as per data compiled by LSEG.
The bank’s provisions and contingencies, or funds set aside to cover loan losses, nearly doubled on-year to 18.20 billion rupees.
It also reported a deterioration in asset quality, with gross non-performing assets ratio at 2.11% at the end of September, compared with 2.02% three months earlier.
Lenders typically choose to set aside more funds to cover for potential bad loans and shield their balance sheets from future shocks.
Kotak Mahindra Bank and RBL Bank also reported deterioration in asset quality earlier this month, amid stress in credit cards and microfinance loans.
IndusInd’s net interest income – the difference between interest earned and paid – rose 5% from last year to 53.47 billion rupees, also missing analysts’ expectations of 55.39 billion rupees.
Its net interest margin shrunk, meanwhile, sharply to 4.08% from 4.25% in the previous quarter and 4.29% a year earlier.
($1 = 84.0450 Indian rupees)
(Reporting by Dimpal Gulwani and Siddhi Nayak; Editing by Varun H K)
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