IndusInd Bank Q3 Profit Plummets 91% to Rs 128 Crore

IndusInd Bank announced its financial results for the third quarter of fiscal year 2026 on January 23, revealing a significant downturn in profitability. The private lender's consolidated net profit fell by 90.8% year-on-year (YoY) to Rs 127.98 crore for the quarter ending December 31, 2025. This marks a steep decline from the Rs 1,402.33 crore profit reported in the same period of the previous fiscal year. The sharp drop was primarily driven by a contraction in core income and continued pressure on its balance sheet.

Core Earnings Under Pressure

The bank's primary income source, Net Interest Income (NII), which is the difference between interest earned and interest paid, saw a considerable decline. NII for Q3 FY26 stood at Rs 4,562 crore, down 12.7% from Rs 5,228 crore in the corresponding quarter last year. This reduction in core income highlights the challenges the bank faced in its lending operations and margin management over the past year. Pre-Provision Operating Profit (PPOP) also took a significant hit, falling 37% YoY to Rs 2,270 crore.

Sequential Improvement Offers Some Relief

Despite the stark year-on-year comparison, the bank's performance showed a notable improvement on a sequential basis. It returned to profitability after reporting a net loss of Rs 445 crore in the second quarter (Q2 FY26). This recovery was aided by a 20% quarter-on-quarter (QoQ) decline in provisions and contingencies, which stood at Rs 2,096 crore. Furthermore, NII grew by 3% sequentially, and the Net Interest Margin (NIM) improved to 3.52% from 3.32% in the previous quarter, indicating some operational stabilization.

Asset Quality Shows Marginal Improvement

IndusInd Bank's asset quality remained largely stable with a slight improvement. The Gross Non-Performing Assets (NPA) ratio improved marginally to 3.56% as of December 31, 2025, from 3.60% in the preceding quarter. The Net NPA ratio remained unchanged at 1.04%. The bank continued to maintain a strong safety buffer, with its Provision Coverage Ratio (PCR) standing at a healthy 72%, an improvement from 71.81% in the September quarter.

Key Financial Metrics for Q3 FY26

Strategic Shrinking of Loan Book

The bank's balance sheet showed signs of a deliberate consolidation strategy. Net advances contracted by 13.1% YoY to Rs 3,18,844 crore. This aligns with management's commentary about focusing on balance sheet optimization by letting go of unprofitable loans. Total deposits also declined by 3.8% YoY to Rs 3,94,022 crore, although they saw a marginal 1.1% increase from the previous quarter.

Deposit Base and CASA Ratio Concerns

A key area of concern remains the bank's low-cost deposit base. The Current Account Savings Account (CASA) ratio continued its downward trend, falling to 30.3% in the December quarter from 34.9% a year earlier and 30.7% in the September quarter. This indicates a persistent shift by customers towards higher-yielding term deposits, which could put pressure on the bank's future funding costs.

Management Focuses on Balance Sheet Optimisation

Rajiv Anand, the MD and CEO of IndusInd Bank, stated that the bank's focus during the quarter was on optimizing its balance sheet and exercising caution, particularly in microfinance disbursements. He noted that while this resulted in a return to profitability, the bank remains focused on strengthening its financial position. "We are optimistic about resilient domestic economy and aim to participate in the growth recovery in a calibrated manner," Anand said.

New Chairman Appointed Amid Governance Overhaul

The bank also announced a significant leadership change. The board approved the appointment of Arijit Basu, a former Managing Director of State Bank of India, as the new part-time chairman, effective January 31, 2026. He will succeed Sunil Mehta, whose term is ending. This change comes after a period of leadership transition and concerns over governance that saw the exit of other top executives in the past year.

Market Reaction

On the day the results were announced, IndusInd Bank's shares closed down 0.5% at Rs 898 apiece on the stock exchange. The financial results were disclosed after market hours, and their full impact will be observed in the subsequent trading sessions. The bank's performance was largely in line with the lower end of analyst expectations, which had predicted a sharp erosion in profit.

Conclusion

IndusInd Bank's third-quarter results present a mixed picture. While the steep year-on-year profit decline and shrinking loan book are significant concerns, the sequential recovery to profitability and stable asset quality provide some comfort. The management's strategy of consolidating the balance sheet and the appointment of a new chairman will be critical in navigating the challenging operating environment and steering the bank towards sustainable growth.