IndusInd Bank Q3 Profit May Plunge 97% Amid Loan Slump

Introduction

IndusInd Bank is poised to report a significant contraction in profitability for the third quarter of fiscal year 2026. Analyst forecasts indicate a potential 97% year-on-year decline in net profit, a result of a shrinking loan book, falling core income, and persistent pressure on asset quality. As the bank prepares to announce its results, investors are closely monitoring its ability to navigate these challenges, especially under the guidance of its new management and amid an ongoing regulatory investigation.

A Sharp Decline in Profitability Expected

Projections for the December-ending quarter paint a stark picture for IndusInd Bank. Net profit is anticipated to fall to approximately ₹42 crore, a dramatic drop from the ₹1,402 crore reported in the corresponding quarter of the previous year. This steep decline is attributed to a confluence of negative factors. The bank's loan book has reportedly contracted by 13% year-on-year, directly impacting its interest-earning capacity. Furthermore, core income is expected to have declined by 17%, compounded by a 29% fall in fee income. These pressures are expected to push the pre-provisioning operating profit (PPOP) down to an estimated ₹2,030 crore.

Wide-Ranging Analyst Estimates

The outlook among market analysts varies significantly, reflecting the uncertainty surrounding the bank's performance. Estimates for the quarter's bottom line range from a modest profit of ₹300 crore to a substantial loss of ₹2,000 crore. This wide dispersion underscores the complex operating environment and the challenges in forecasting the bank's provisioning requirements and income streams. The figures stand in contrast to the bank's Q3 FY25 performance, where it had reported a Net Interest Income (NII) of ₹5,296 crore and a PPOP of ₹4,042 crore, highlighting the severity of the current downturn.

Asset Quality Under the Microscope

While the profit forecast is grim, there are some expectations of sequential improvement in asset quality metrics. Provisions are anticipated to ease following accelerated write-offs and increased provisions on the Microfinance Institution (MFI) portfolio in the preceding quarter. Credit costs are projected to improve by 85 basis points sequentially, potentially settling in the range of 2.2% to 2.3%. However, the bank's management has previously advised caution, stating that a substantial decline in credit costs should not be expected within the next two quarters. This signals ongoing vigilance, particularly concerning the performance of the MFI and vehicle financing segments, which remain key areas of focus for investors.

Regulatory Scrutiny Adds to Concerns

Adding to the operational headwinds, IndusInd Bank is currently under investigation by the Serious Fraud Investigation Office (SFIO). The probe relates to alleged accounting irregularities, including discrepancies reportedly amounting to ₹2,600 crore. The bank has confirmed its cooperation with the authorities. This investigation introduces a layer of governance risk and uncertainty, which could weigh on investor sentiment until a resolution is reached. The market will be looking for clarity on the matter in the upcoming earnings announcement.

Market Performance and Sector Context

Despite the challenging outlook, IndusInd Bank's stock has shown a degree of resilience. On Friday, January 23, 2026, the shares were trading up by 0.75% at ₹909.2 and have registered a 7% gain over the past month. This suggests that some of the negative news may already be priced in, or that investors are awaiting the final results before making significant moves. The bank's current market capitalization stands at approximately ₹70,658 crore, with a negative trailing twelve-month P/E ratio of -93.09, reflecting its recent net losses.

The broader Indian banking sector is navigating a mixed environment. While system-wide loan growth remains robust at over 11%, many private sector banks are grappling with narrowing Net Interest Margins (NIMs) and rising provisioning costs. In this context, IndusInd Bank's performance will be benchmarked against competitors like State Bank of India and Kotak Mahindra Bank, which reported stronger profit growth in the previous fiscal year's third quarter.

Key Challenges Moving Forward

The primary challenges for IndusInd Bank in the near term include stabilizing its balance sheet, improving its declining low-cost CASA ratio, and managing margin pressures effectively. The operational update for the quarter already pointed to a 13% YoY drop in its loan book and a continued slip in the CASA ratio, indicating a greater reliance on higher-cost deposits. The strategic direction provided by the new management will be critical in addressing these issues and restoring the bank to a path of sustainable growth.

Conclusion

IndusInd Bank is facing a pivotal quarter, with expectations of a severe impact on its profitability. The combination of a contracting loan portfolio, reduced income, and ongoing asset quality concerns presents a formidable challenge. Investors and stakeholders will be keenly awaiting the official results and management's commentary for insights into the bank's strategy for recovery, its plans to address the SFIO investigation, and its outlook on achieving a stable Return on Assets.