IndusInd Bank Q3 Profit Plummets 91% to Rs 128 Crore

Introduction

IndusInd Bank announced a severe contraction in its third-quarter earnings for the fiscal year 2026. On January 23, 2026, the private sector lender reported a consolidated net profit of Rs 127.98 crore for the quarter ending December 31, 2025. This represents a staggering 90.8% year-on-year (YoY) decline from the Rs 1,402.33 crore profit recorded in the same period of the previous fiscal year. The sharp fall in profitability was driven by a significant drop in core income and a strategic increase in provisions as the bank focuses on strengthening its balance sheet.

Core Earnings Under Pressure

The bank's primary income source, Net Interest Income (NII), experienced a notable decline. NII for Q3 FY26 fell by 12.7% YoY to Rs 4,562 crore, down from Rs 5,228 crore in the corresponding quarter last year. This compression in core income reflects challenges in the lending environment and a deliberate strategy to shed unprofitable loans. The bank's Pre-Provision Operating Profit (PPOP) also took a substantial hit, falling 37% YoY to Rs 2,270 crore. Furthermore, other income streams, including fees, dropped to Rs 1,707 crore from Rs 2,355 crore in the year-ago period, adding to the pressure on overall revenue.

Asset Quality and Provisioning

Despite the sharp drop in profit, IndusInd Bank's asset quality metrics showed marginal sequential improvement. The Gross Non-Performing Assets (NPA) ratio stood at 3.56% as of December 31, 2025, a slight improvement from 3.60% in the previous quarter. The Net NPA ratio remained stable at 1.04% quarter-on-quarter. However, the bank significantly increased its safety buffers. Provisions and contingencies for the quarter rose by 20% YoY to Rs 2,096 crore. This proactive provisioning led to a healthy Provision Coverage Ratio (PCR) of 72%, indicating that the bank is adequately covered against potential loan losses. Total loan-related provisions stood at Rs 10,027 crore, or 3.16% of the total loan book.

Balance Sheet Contraction

The bank's operational update revealed a strategic contraction of its balance sheet. Net advances declined by 13% YoY to Rs 3.18 lakh crore. Similarly, total deposits fell by 4% YoY to Rs 3.94 lakh crore. A key area of concern was the Current Account Savings Account (CASA) ratio, which declined to 30.30% from 34.90% a year earlier. This indicates a shift by customers towards higher-yielding term deposits, which could increase the bank's cost of funds. Despite these contractions, the bank's capital adequacy ratio (CRAR) remained comfortable at 16.94%, well above the regulatory requirement.

Key Financial Metrics: Q3 FY26 Performance

Management Commentary and Strategy

Rajiv Anand, the MD and CEO of IndusInd Bank, explained the quarter's performance as a result of a deliberate strategy. He stated, "During Q3FY26, the Bank continued focus on optimisation of its balance sheet by letting go unprofitable loans and deposits along with being cautious on microfinance disbursements." Anand highlighted that the bank has returned to profitability after posting a loss in the previous quarter and emphasized the robustness of the balance sheet, supported by healthy capital adequacy and liquidity. The management's commentary suggests a focus on long-term stability over short-term growth, a move aimed at navigating a challenging economic environment and strengthening the bank's foundation.

Leadership Transition

The bank also announced a significant change in its leadership. The board approved the appointment of Arijit Basu, a former Managing Director of the State Bank of India, as an additional director and part-time chairman for a three-year term, effective January 31, 2026. He will succeed Sunil Mehta, whose term is ending. This appointment comes after a period of leadership changes and is seen as a move to bring experienced guidance to the bank as it navigates its strategic shift.

Market Reaction and Outlook

The financial results were announced after market hours on January 23. On the day of the announcement, IndusInd Bank's shares fell 0.5% to close at Rs 898 apiece on the stock exchange. The market's reaction was relatively muted, as the sharp profit decline was largely anticipated by analysts. The bank's focus is now on navigating the recovery, managing its asset quality, especially in the microfinance segment, and gradually rebuilding its loan and deposit base in a calibrated manner. The performance in the upcoming quarters will be crucial in determining the success of its balance sheet optimization strategy.

Conclusion

IndusInd Bank's third-quarter results reflect a period of significant strategic adjustment, marked by a sharp decline in profitability in favor of balance sheet consolidation. While the headline numbers are concerning, the stable asset quality and strong capital position provide a cushion. The new leadership under Arijit Basu will be closely watched as the bank aims to steer towards sustainable growth and improved profitability in the future.