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IndusInd Bank reported Q3 FY26 PAT of INR 128 crore, down sharply due to elevated provisions of INR 2,096 crore, driven by continued stress in the microfinance portfolio. Pre-provision operating profit grew 11% QoQ to INR 2,270 crore, supported by disciplined cost management and improved NIM (normalized at 3.35%). The bank is right-sizing its balance sheet: average loans degrew 2% QoQ, with microfinance loans down 17% QoQ to INR 17,669 crore. Management guided for industry-level loan growth by FY27 and a 1% ROA target by end-FY27, but near-term profitability remains constrained by high credit costs. Key risks include sustained MFI stress, deposit franchise rebuilding, and potential ECL impact of 1.5-1.7% of loans.
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Guidance to track
- Management targets loan growth in line with the banking system by FY2026-27, implying ~12-13% growth.
- The bank aims to achieve a return on assets of approximately 1% by the back end of FY2026-27.
- Vehicle finance slippages are expected to be 20 bps lower in FY26 vs FY25, both in absolute and percentage terms.
- Disbursements in Q3 exceeded repayments from mid-October, so the microfinance book is expected to grow sequentially from Q4 FY26.
Risks flagged
- Microfinance slippages remain elevated; credit cost at 2.6% in Q3, well above historical levels, pressuring profitability.
- Management highlighted difficulty in improving deposit quality and quantity amid industry-wide scramble for deposits.
- Expected credit loss norms from April 2026 could impact net worth by 1.5-1.7% of loan book pre-tax, as disclosed by CFO.
- Analyst asked about RBI annual supervisory outcome on agri PSL; management declined to comment, citing confidentiality.
Key quotes
- Our intent is to bring down net NPA well below 1% in the 60-70 basis points vicinity over a period of time.
- We are now writing off at 365 days post NPA. So that's one change that we made.
- I think the challenge for us will certainly be to be able to improve the quality and quantity of liabilities as we go forward.
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