IndusInd Bank has released its Q2 FY2026 (July–September 2025) financial results, highlighting a tough quarter influenced by higher provisions and slower income growth. The private-sector lender reported a net loss of ₹437 crore, a sharp reversal from a net profit of ₹1,331 crore in Q2 FY2025. This decline was primarily driven by increased provisions in the microfinance segment and pressure on net interest income (NII) and other income.
Despite these short-term challenges, IndusInd Bank continues to maintain a strong capital base and remains committed to restoring profitability in the coming quarters.
In this article, we’ll break down IndusInd Bank’s Q2 FY2026 results, exploring its key financial highlights, business performance, and management outlook for the rest of the fiscal year.
Key Financial Highlights
| Metric | Q2 FY26 | Q2 FY25 | YoY Growth |
|---|---|---|---|
| Revenue (Total Income) | ₹6,060 crore | ₹7,532 crore | -20% |
| Net Profit / (Loss) | ₹(437) crore | ₹1,331 crore | N/A (loss) |
| Operating Profit (Pre-Provision) | ₹2,047 crore | ₹3,600 crore | -43% |
| Earnings Per Share (EPS) | Negative | ₹17.2 | N/A |
The decline was driven by a drop in NII (down 18%) and lower fee income (down 27%), while provisions surged 45% YoY to ₹2,631 crore, primarily due to stress in the microfinance loan book.
Management Commentary
The bank’s management attributed the quarterly loss to prudential provisioning and cautious lending amid sectoral headwinds, especially in the microfinance segment.
“We have taken a conservative approach in provisioning to strengthen our balance sheet and protect future profitability. The underlying core businesses remain resilient, with stable asset quality in vehicle and corporate lending,”
said the management in its post-results commentary.
They also reaffirmed a focus on retail deposit growth, digital transformation, and cost optimization as key priorities for FY26.
Segment Performance
- Consumer Banking: Accounts for 60% of the loan book (₹1.95 lakh crore), led by vehicle finance (29%) and microfinance (7%). Microfinance disbursements fell 36% QoQ due to market stress.
- Corporate Banking: Contributes 40% of total advances, with healthy asset quality; 77% of exposure is rated A and above.
- Deposits: Down 6% YoY to ₹3.89 lakh crore, reflecting reduced wholesale funding and a strategic shift toward retail deposits, which now form 47% of the total base.
Balance Sheet Overview
| Item | Q2 FY26 | Q2 FY25 | YoY Change |
|---|---|---|---|
| Total Assets | ₹5,27,490 crore | ₹5,43,407 crore | -3% |
| Advances (Loans) | ₹3,25,881 crore | ₹3,57,159 crore | -9% |
| Customer Deposits | ₹3,89,600 crore | ₹4,12,397 crore | -6% |
| CASA Deposits | ₹1,19,771 crore | ₹1,47,900 crore | -19% |
| Net Worth | ₹62,524 crore | ₹63,900 crore | -2% |
The bank continues to de-risk its balance sheet, cutting exposure to volatile microfinance and wholesale segments while maintaining a Capital Adequacy Ratio (CRAR) of 17.10%, well above regulatory norms.
Key Financial Ratios
| Ratio | Q2 FY26 | Q2 FY25 | Change |
|---|---|---|---|
| Net Interest Margin (NIM) | 3.32% | 4.08% | -76 bps |
| Gross NPA (GNPA) | 3.60% | 3.64% (QoQ) | -4 bps QoQ |
| Net NPA (NNPA) | 1.04% | 1.12% (QoQ) | -8 bps QoQ |
| Provision Coverage Ratio (PCR) | 72% | N/A | +2% QoQ |
| Cost-to-Income Ratio | 66.22% | 52.21% | +1,401 bps |
| Return on Assets (RoA) | -0.33% | 1.00% | -133 bps |
| Return on Equity (RoE) | -2.68% | N/A | N/A |
While profitability took a hit, asset quality showed marginal improvement QoQ, and capital buffers remain strong. Liquidity coverage stood at 132%, offering comfortable headroom for near-term obligations.
Market Reaction
Following the results announcement, IndusInd Bank’s stock fell nearly 2% intraday, reflecting investor caution after the surprise loss. Analysts highlighted that while asset quality remains steady, elevated provisions and shrinking NII could weigh on short-term earnings performance.
Peer Comparison
Compared to peers like HDFC Bank, ICICI Bank, and Axis Bank, IndusInd’s results were weaker, primarily due to microfinance exposure and pressure on interest income. However, its capital adequacy (17.1%) and liquidity ratios are higher than most peers, providing a solid foundation for recovery once credit costs normalize.
Future Outlook
The bank’s management expects a gradual recovery in profitability from Q3 FY26 onwards, as provisioning normalizes and the microfinance book stabilizes. Focus areas include:
- Strengthening retail deposit franchise and digital banking.
- Restoring NIM above 3.6% through repricing of assets and liabilities.
- Maintaining asset quality discipline while cautiously expanding in high-margin consumer segments.
FAQs
Q1: What was IndusInd Bank’s profit/loss in Q2 FY26?
The bank reported a net loss of ₹437 crore, compared to a profit of ₹1,331 crore in Q2 FY25.
Q2: What led to the loss this quarter?
Higher provisions (especially for microfinance loans), lower NII, and a sharp drop in other income.
Q3: How did the bank’s margins perform?
NIM stood at 3.32%, down 76 bps YoY due to lower yields and a change in loan mix.
Q4: What is the outlook for upcoming quarters?
Management expects profitability to recover as provisioning normalizes and the bank focuses on core retail and corporate growth.
Conclusion
IndusInd Bank’s Q2 FY26 results reflect a challenging quarter, with earnings under pressure from higher provisions and declining margins. However, the bank’s strong capital base, stable asset quality, and strategic de-risking efforts suggest resilience. With expected recovery in disbursements and normalization of credit costs, the bank aims to regain profitability momentum in the second half of FY26.
Source: IndusInd Bank Q2 FY26 Investor Presentations
