Informist, Friday, Jul. 25, 2025

By Sourabh Kumar

MUMBAI – After a rare quarterly loss triggered by discrepancies in its derivatives portfolio accounting, IndusInd Bank Ltd. is set to return to the black in the June quarter. However, its net profit is expected to slump from last year due to shrinking net interest margin and a likely surge in provisions, according to brokerages tracking the bank's performance.

After incurring a net loss of INR 22.36 billion in the March quarter, IndusInd Bank is expected to register a net profit of INR 7.21 billion in the first quarter of 2025-26 (Apr-Mar), down 66% from last year, according to the average of estimates from 13 brokerage firms. The estimates for net profit ranged from INR 1.94 billion to INR 11.50 billion. The lowest estimate was from Emkay Global Financial Services Ltd. while Nirmal Bang Equities Pvt. Ltd. provided the highest estimate.

IndusInd Bank had disclosed in March the discrepancies in the accounting of its derivatives portfolio. The March quarter results showed that the bank wrote off INR 19.60 billion in addition to making provisions of INR 24.17 billion, almost triple of the corresponding quarter of last year. It included INR 17.91 billion of provisions for microfinance loans misclassified as standard assets and on which interest income had accrued.

The net interest income of the bank is expected to fall nearly 21% on year to INR 42.81 billion, according to the average of estimates from 13 brokerage firms. However, it is seen rising 40% sequentially. Antique Stock Broking Ltd. gave the highest estimate of INR 48.39 billion for net interest income while the lowest estimate of INR 33.03 billion was from IDBI Capital Market Services Ltd. IDBI Capital Market Services expects "NII to decline by 38.9% year-on-year and grow by 5.7% quarter-on-quarter due to decrease in loan and deposit growth during the quarter."

IndusInd Bank's net advances fell 3.9% on year and 3.1% on quarter to INR 3.34 trillion as of Jun. 30, according to the provisional figures. The bank's corporate loans portfolio took the biggest hit and was down 14.4%. Deposits of the bank were also down marginally on year and 3.3% on quarter to INR 3.97 trillion as of Jun. 30. The current accounts-savings accounts deposit ratio fell to 31.49% as of Jun. 30 from 32.81% in the previous quarter.

Nuvama Wealth Management Ltd. expects IndusInd Bank's June quarter other income to rise nearly seven times from the March quarter to INR 22.1 billion, but fall about 6% from the same quarter last year. The total non-interest income of the bank is also expected to surge on quarter to INR 25.6 billion, the brokerage firm said. However, it estimated the non-interest income to increase a modest 5% from last year. Motilal Oswal Financial Services Ltd. also expected IndusInd Bank's other income to rise multi-fold in the June quarter to INR 24.2 billion.

Prabhudas Lilladher Pvt. Ltd. expects IndusInd Bank's net interest margin to "normalise" to 3.61% in Apr-Jun. The brokerage firm expects the margin to decline 98 bps on year but rise 118 bps on quarter. InCred Research Services Pvt. Ltd. estimated the net interest margin to rise 120 bps on quarter, the most among the brokerage firms which provided estimates for the margin.

Provisions of IndusInd Bank are expected to remain high, considering the slippages from micro-finance institutions portfolio are likely to remain elevated, according to Kotak Institutional Equities. It forecasts IndusInd Bank's loan-loss provision will rise 61% on year to INR 16.92 billion in the June quarter. However, it is expected to decline sequentially due to a high base.

Kotak Institutional Equities estimated the bank's slippages at INR 17 billion in the June quarter. The slippages ratio is expected to rise 18 basis points on year to 2%, the brokerage firm said in its report. However, the ratio is likely to decline 350 bps on quarter due to a high base, it said. Nuvama Wealth Management's estimate for slippages is much higher at INR 30 billion. It expects the slippage ratio to be 3.45% in the June quarter, down almost 240 bps sequentially but up 141 bps from last year.

JM Financial Institutional Securities Pvt. Ltd. said mid-sized banks such as IndusInd Bank have higher exposure to unsecured segment, and therefore are likely to register higher credit costs. Prabhudas Lilladher expects IndusInd Bank's credit costs to rise 47 bps on year to 1.67%. However, it forecasts a sequential fall of 113 bps. Even Nomura Equity Research expects the bank's credit costs to "remain elevated led by stress in micro-finance institutions but should moderate on a quarter-on-quarter basis".

Prabhudas Lilladher sees IndusInd Bank's gross non-performing asset ratio "to worsen by 21 bps sequentially" to 3.35% as on Jun. 30. On a yearly basis, the brokerage firm estimated gross non-performing asset ratio to rise 133 bps. The estimate by Motilal Oswal for the gross non-performing asset ratio was also similar at 3.4% as on Jun. 30.

IndusInd Bank is scheduled to release its earnings Monday. At 1122 IST, shares of the bank traded down 2.2% at INR 828.95 on the National Stock Exchange. Since the announcement of March quarter results, the bank's stock is up almost 7%.

Of the 22 brokerage reports on IndusInd Bank available with Informist, eight have a 'buy' rating with an average target price of INR 1,261 and seven have a 'sell' rating at an average target price of INR 668. The rest of the seven have a 'hold' rating at an average target price of INR 862.

Following are the Apr-Jun earnings estimates for IndusInd Bank based on reports from 13 brokerage firms in descending order by the estimate of net profit:

End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Deepshikha Bhardwaj

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