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IndusInd Bank Ltd

| Q2 FY26 Earnings Conference Call

NEUTRAL SENTIMENT

Report Source

⬤18th Oct 25

Summary : IndusInd Bank reported a Q2 FY26 net loss due to microfinance provisioning, with new CEO focusing on strengthening leadership, diversifying assets, and improving asset quality while navigating global uncertainties.

Management Perspective neutral : The CEO acknowledges a net loss and elevated microfinance slippages, stating a need to 'stabilize the platform' before aggressive growth. However, he expresses optimism about India's resilience, the Bank's potential, and levers for future growth, aiming for 1% RoA.

Concall Report Analysis & Insights

Business Overview

  1. Consolidated balance sheet by reducing wholesale deposits and cautious microfinance disbursements.
  2. Retail deposits remained steady, improving LCR share to 47.3% from 46.5% QoQ.
  3. Vehicle disbursements impacted by GST changes, but corporate and other retail disbursements were stable.
  4. Asset quality, excluding microfinance, improved sequentially in gross and net slippages.
  5. Net loss of Rs.437 crores due to accelerated provisioning and write-offs on microfinance loans.

Future Growth Prospects

  1. Focus on scaling MSME, home loans, gold loans, and agri financing to diversify portfolio.
  2. Investing in distribution and digital capabilities to strengthen vehicle finance business.
  3. Accelerating retailization journey, especially focusing on low-cost deposits.
  4. Building growth momentum in vehicles, retail, and profitable corporate segments.
  5. Aiming to achieve 1% Return on Assets (RoA) in the medium term.

Management Insights

  1. India demonstrates resilience despite global uncertainties, supported by domestic growth and policy measures.
  2. Focus is on realizing the Bank's full potential by leveraging capabilities and unlocking new value areas.
  3. Strengthened leadership team with new key hires, including CFO and Head of Business Transformation.
  4. Prudently rationalized outstanding NPA book through accelerated microfinance provisioning.
  5. Committed to fortifying the balance sheet and ensuring healthy capital adequacy and liquidity.

Signs of Skepticism

  1. The exact timeframe to reach 1% RoA is still too early to call, pending a three-year plan.
  2. Despite accelerated write-offs, net NPA ratio is still higher than a year ago, raising questions about continued write-offs.
  3. Slippages outside MFI are still elevated, and GNPAs in other product segments are not showing improvement.
  4. The BFIL Qualified Audit Report issues, though management states no new financial impact, indicate past control lapses.
  5. The divergence in LCR retail deposits between end-of-period and average numbers over six months.

Risk Factors

  1. Microfinance slippages remained elevated, requiring accelerated provisioning and write-offs.
  2. Global uncertainties, tariff-related disruptions, and geopolitical tensions persist.
  3. Pace of growth moderated over the past 12-18 months despite strong underlying fundamentals.
  4. Potential for lower asset yields due to corporate loan repricing and adverse loan mix.
  5. Need to improve internal controls and governance framework in subsidiary entity (BFIL).

Good To Know

  1. New CEO, Rajiv Anand, is addressing the conference call for the first time.
  2. Several key leaders, including a new CFO, Legal Counsel, and Head of Internal Audit, have recently joined.
  3. The Bank has healthy capital adequacy with CET1 ratio of 15.88% and CRAR of 17.10%.
  4. Digital platforms INDIE and INDIE for Business showed healthy user growth and app ratings.
  5. The Bank is reducing dependence on bulk sources, with Certificate of Deposits down 16% QoQ.

Key Drivers

  1. New leadership team driving strategic changes.
  2. Auto upcycle to boost vehicle finance growth.
  3. Digital platforms expanding customer base.
  4. Retail deposit mobilization improving funding mix.

Key Analyst Discussions

Market Trends & Consumer Behavior

  1. Vehicle disbursements picked up significantly post September 22nd, aided by festive season and economic activity.
  2. Gems and jewelry business shows no NPA, SMA-1 or SMA-2, despite US tariff impacts.
  3. Gems and jewelry clients are mitigating tariff issues by moving manufacturing, refocusing markets, and higher caratage.

Financial Highlights

  1. Management aims for Net NPA ratio in the vicinity of 50-60 basis points in the medium term.
  2. Accelerated microfinance write-offs are unlikely to recur at the same level next quarter.
  3. Net Interest Margin (NIM) was impacted by one-off recovery and microfinance portfolio reduction.
  4. Core pre-provision operating profit remained stable QoQ at Rs.1,940 crores.
  5. The Bank targets a fee-to-assets ratio of about 1.5% over time.

Product Composition

  1. Home loan book crossed Rs.5,500 crores, growing 84% YoY, despite cost of funds disadvantage.
  2. Scaling home loans helps build liability franchise and cross-sell other products.
  3. Microloan book contracted 25% QoQ due to cautious stance and weaker demand.
  4. The share of non-MFI book now stands at 25% versus 15% YoY, reflecting diversification.
  5. Traditional retail assets and MSME are key growth drivers for portfolio diversification.

Strategic Considerations

  1. New CEO is building a three-year plan to achieve strategic objectives.
  2. Management is filling leadership gaps, with new hires expected in HR and digital.
  3. The Bank is strengthening internal audit and carving out a dedicated collection vertical for 90+DPD customers.
  4. Credit guarantee (CGFMU) coverage for microfinance disbursements is growing.
  5. Staff accountability has been established for past issues, with actions largely completed.
IndusInd Bank Ltd (INDUSINDBK) Concall Report Analysis & Insights | Dhanarthi