IndusInd Bank's shares experienced a 2% increase despite a significant 72% year-over-year (YoY) drop in net profit for the first quarter of the financial year 2025-26 (Q1 FY26). The bank announced a consolidated net profit of ₹604 crore for the April-June quarter, a sharp decline compared to ₹2,171 crore in the corresponding quarter of the previous year. This decline was primarily attributed to higher provisions for retail loans and reduced income from core and non-core operations.
Key Financial Highlights and Performance
The bank's Q1 FY26 results reveal a mixed performance:
- Profit Decline: Net profit plummeted by 72% YoY to ₹604 crore.
- Total Income Decrease: Total income (interest income and fee income) dropped to ₹14,420.80 crore, compared to ₹14,988 crore in Q1 FY25.
- Net Interest Income (NII) Reduction: NII decreased by 14% YoY to ₹4,640 crore due to a shrinking loan book.
- Net Interest Margin (NIM): NIM stood at 3.46% for Q1 FY26, down from 4.25% in Q1 FY25.
- Gross NPA Ratio Increase: The gross non-performing assets (GNPA) ratio increased to 3.64% in Q1 FY26, up from 3.13% in the previous quarter.
- Operating Expenses Increase: Operating expenses rose to ₹4,229 crores from ₹3,897 crores for the corresponding quarter of the previous year.
Despite these challenges, IndusInd Bank Chairman Sunil Mehta stated that the bank delivered "clean and profitable" results in the June quarter, signaling a "robust recovery" from the March quarter. He emphasized that the Q1 results were free from prior-period irregularities and that the financial impact of legacy issues is now behind them. The bank's return to profitability on a quarterly basis, with a profit after tax of ₹604 crores, is a positive sign.
Factors Influencing Investment Decisions
Several factors should be considered before investing in IndusInd Bank:
- Asset Quality Concerns: Brokerages have noted asset quality deterioration as a persistent issue. The increase in the GNPA ratio to 3.64% in Q1 FY26, compared to 3.13% in the previous quarter, raises concerns about the quality of the bank's assets.
- Brokerage Ratings: Motilal Oswal has maintained a "Neutral" rating on IndusInd Bank, raising the target price to ₹830 from ₹800.
- Market Trends and Growth Potential: IndusInd Bank is focusing on sustainable growth, digital innovation, and commitment to its customers. The bank has also enhanced its customer base and integrated Environmental, Social, and Governance (ESG) practices.
- Share Price Forecasts: Different analysts have varying predictions for IndusInd Bank's share price. One source forecasts a price of ₹939.329 by July 24, 2026, and ₹2377.092 by July 24, 2030. Another analysis suggests the share price in 2026 could range between ₹950 and ₹1,300.
Analysts' Recommendations
Analysts' recommendations on IndusInd Bank shares are mixed:
- Some brokerages maintain their stance on the stock but acknowledge concerns about asset quality deterioration, lower fee income, and subdued net interest margin (NIM).
- Motilal Oswal has a "Neutral" rating on the stock, with a target price of ₹830.
Overall Assessment
IndusInd Bank's Q1 FY26 results reveal a significant decline in net profit, primarily due to increased provisions for retail loans and lower income. While the bank has addressed legacy issues and returned to profitability, concerns remain about asset quality and growth.
Before making any investment decisions, investors should carefully consider these factors, conduct thorough research, and consult with a qualified financial advisor.
