IndusInd Bank reported a significant decline in its financial performance for the third quarter, with net profit experiencing a sharp contraction compared to the previous year. The bank's quarterly results reflect challenging operating conditions and highlight key areas of concern for stakeholders.

Financial Performance Overview

The bank's financial metrics for Q3 present a mixed picture, with profitability under pressure while asset quality indicators show marginal stability.

Asset Quality Indicators

Despite the challenging profitability scenario, IndusInd Bank demonstrated slight improvement in its asset quality parameters during the quarter.

The Gross Non-Performing Assets ratio improved marginally to 3.56% from 3.60% on a quarter-over-quarter basis, indicating better asset quality management. The Net Non-Performing Assets ratio remained stable at 1.04%, showing consistency in the bank's recovery mechanisms.

Key Highlights

The quarterly results reveal several critical aspects of the bank's current operational status:

• Net profit declined dramatically by 91% year-over-year to ₹1.30 billion
• Revenue contracted by 11% to ₹114.00 billion compared to the same quarter last year
• Asset quality showed marginal improvement with GNPA ratio declining by 4 basis points
• NNPA ratio maintained stability at 1.04% quarter-over-quarter

The substantial gap between actual net profit of ₹1.30 billion and the estimated ₹420 million suggests the bank exceeded expectations despite the year-over-year decline. This performance reflects the complex dynamics affecting the banking sector and highlights the importance of monitoring both profitability trends and asset quality indicators for a comprehensive assessment of the bank's financial health.

IndusInd Bank is banking on its commercial vehicle and microfinance portfolios to drive recovery as the lender navigates past accounting challenges and leadership changes. Managing Director and CEO Rajiv Anand outlined the bank's strategic focus during the post-December quarter earnings call, expressing confidence in the new leadership team's ability to restore growth momentum.

Loan Portfolio Performance

The bank's loan book performance during the December quarter showed mixed results across different segments:

"We are seeing that incremental disbursals on our microfinance book are behaving much better than what we have seen in the very recent past," Anand said. The CEO expressed optimism that both growth and slippages in the microfinance business will improve significantly from current levels.

Strategic Focus Areas

The bank is concentrating on several key areas to drive future growth:

• Commercial Vehicle Finance: Continues to be a steady performer with 5% year-on-year growth
• Microfinance Recovery: Incremental disbursements showing better repayment behavior
• MSME Segment: Expected to strengthen and support fee income growth
• Retail Liability Franchise: Focus on granular deposits over bulk deposits

Anand highlighted that disbursements remained robust in vehicle finance, retail, and granular corporate lending despite the overall decline in average advances.

Deposit and Liability Strategy

On the liability side, deposits fell 4% year-on-year and 1% quarterly to ₹3.93 trillion. The bank is implementing a strategic shift toward retail deposits:

"Our intent is to grow in line with the market on both assets and liabilities in 2026-27, and as we think about granulizing our liabilities, the intent is to grow our liability franchise faster than our bulk deposits," Anand explained. This strategy aims to reduce funding costs and build a less volatile asset base.

Financial Targets and Capital Position

The bank has set ambitious targets for the coming period:

• Return on Assets: 1% on exit basis over next 12-18 months
• Growth Alignment: Match system-level growth in 2026-27
• Capital Adequacy: Remains comfortable for near-term growth

Management is investing significant resources in strengthening the retail liability business through organizational changes, process improvements, and enhanced branch-level productivity.

Regulatory Matters

Addressing regulatory concerns, Anand clarified that the Serious Fraud Investigation Office probe focuses on certain past and present officials rather than the bank itself. Additionally, an audit qualification at subsidiary Bharat Financial Inclusion relates to legacy issues, with financial impacts already provided for in previous years.