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IndusInd Bank Q3FY26 Concall Update

(Nirmal Bang Retail Research)

# Management reiterated a medium-term ROA target of ~1%, driven by lower financing costs via higher retail deposits, a shift to higher yielding assets (auto finance, MFI, SME), fee income growth, cost efficiency and lower credit costs.

# Management outlined a gradual growth strategy, with growth in FY26-FY27 broadly in line with the industry, market share gains in FY27-FY28 and dominance in select focus segments in FY28-FY29.

Outlook: Neutral

Key financial highlights:

* Advances fell 13% year-on-year and 2.6% quarter-on-quarter, due to the exit from microfinance loans and selective cuts in wholesale banking. Deposits fell 1% quarter-on-quarter, entirely due to a decline in bulk deposits.

* NIM stood at 3.52% (vs. 3.32% quarter on quarter), including a 17 basis point benefit from interest on income tax refunds and a one-off interest recovery; the normalized NIM was 3.35%. The margin improvement was caused by declining financing costs as a result of the repricing of term deposits, partly offset by an unfavorable credit mix as a result of the further reduction of the microfinance portfolio.

*Opex stood at Rs. 3,999 cr, including a one-time Rs. 230 cr impact of implementation of labor law.

* Gross NPA was 3.56% and net NPA was 1.04%; Management aims to bring net NPA below 1% over time (targeting a range of 60-70 basis points), although no firm timeline was given.

* PCR was 72% and is expected to gradually rebuild as derailments normalize and depreciation gradually decreases. The LCR was 122%.

Business segment performance:

Vehicle Finance reported payouts of Rs. 12,900 cr (+26% QoQ) and a loan book of Rs. 98,196 cr (+2% QoQ), powered by MHCVs, tractors and passenger cars. Asset quality has improved year-on-year, with slippages expected to be better in FY26 than in FY25; Management expects a supportive demand environment, supported by fiscal and policy measures.

Microfinance disbursements (BFIL) amounted to Rs. 3,598 cr, while the book fell to Rs. 17,669 cr (–17% quarter-on-quarter) due to contractual reduction. CGFMU warranty coverage is expected to increase to ~38% of standard book. 31–90 The DPD among MFIs fell to 2.4% in December ’25 (compared to 3.2% in September ’25).

Consumer Banking (Retail Assets) reported total assets of Rs. 31,057 cr (+18% YoY), led by strong home loan growth of Rs. 6,114 cr (+94% YoY; +10% QoQ). Personal loans were stable at Rs. 10,598 cr (+12% YoY), while credit card loans fell to Rs. 10,264 cr (–6% YoY), with expenses of Rs. 16,318 kr.

Rural & Priority Banking saw trade loans rise to Rs. 7,338 cr (+16% YoY; 5.79 lakh borrowers), affordable housing loans increase to Rs. 2,692 cr (+25% YoY), and Kisan Credit and other rural loans remain stable at Rs. 4,267 kr. The segment continues to diversify beyond MFIs while supporting PSL obligations.

SME Banking reported a portfolio of Rs. 43,957 cr.

Wholesale Banking’s loans fell 5% quarter-over-quarter, while portfolio quality remained healthy with 82% of customers rated A or higher.

* Management indicated that there is no immediate need for growth capital in the next twelve to eighteen months. The expected transition to the ECL framework is estimated to have an impact of ~1.5% to 1.7% of the loan portfolio (before taxes).