IndusInd Bank Shares Jump 2% Despite Q1FY26 Profit Fall, Asset Concerns

On Tuesday, IndusInd Bank shares jumped 2 percent, touching a day’s high of Rs 818.85 on NSE after releasing its Q1FY26 results, which come at a turbulent time for the bank, reflecting both financial stress and organisational restructuring. The lender reported a sharp fall in standalone net profit, which declined by 68 percent year-on-year to Rs 684 crore. This was primarily driven by a significant drop in core operating metrics such as net interest income (NII), which slid 14 percent YoY to Rs 4,640 crore, down from Rs 5,408 crore a year ago, while fee and other income also contracted, coming in at Rs 2,157 crore compared to Rs 2,442 crore last year. Net interest margin (NIM) for the quarter stood at 3.46 percent, while the operating profit margin on loans dropped to 3.08 percent, and the cost-to-income ratio remained elevated at 62.23 percent.

Asset quality has deteriorated noticeably, with gross non-performing assets (GNPA) spiking to 3.64 percent, up from 2.02 percent a year prior and higher than the 3.13 percent seen in the preceding quarter. The net NPA ratio increased to 1.12 percent, highlighting the strain on the bank’s loan portfolio. In Consumer Banking, the total NPA for Q1FY26 stood at 4.74 percent compared to 4.08 percent in the previous quarter, out of which microloans are currently facing an NPA of 16.39 percent, the two-wheeler segment has 10.21 percent, the tractor segment with 4.67 percent, and credit cards have 3.50 percent, respectively. Despite these headwinds, the bank managed to return to profit quarterly, but profitability remains well below historical averages.

Crucially, these lackluster results follow a series of troubling events. The bank was hit by a major accounting discrepancy related to derivatives earlier this year. This resulted in reported losses amounting to nearly Rs 1,979 crore and triggered a wave of top management exits, most notably the sudden resignation of CEO Sumant Kathpalia and CFO Gobind Jain in April 2025. The departures, coming just before the disclosure of these losses, stoked concerns about internal control lapses and governance at the bank, leaving IndusInd in a particularly precarious situation.

In response, the bank’s management, led by new Chairman Sunil Mehta and a reconstituted executive committee, has attempted to reassure investors and stakeholders. In its post-results commentary, management reiterated its commitment to restoring financial stability and rebuilding trust. Sunil Mehta highlighted that decisive steps are being taken to strengthen risk management and internal controls. He also pointed to ongoing efforts to recalibrate the bank’s loan mix and reduce risky exposures, particularly in derivatives and unsecured segments. The bank plans to shore up its capital base and focus on retail lending while undertaking a technology-driven overhaul to improve operational efficiency and customer experience. Management is confident that these measures, despite difficulties, will position the bank for a gradual turnaround over the coming quarters.

Market sentiment, though, remains cautious. IndusInd Bank’s share price has crashed and is nearly down by 46 percent from its 52-week high, with the stock now trading around Rs 802, down significantly from its highs of Rs 1,498. The equity’s sharp decline mirrors broader concerns about asset quality, earnings volatility, and uncertainty about the bank’s future leadership and strategy.

Brokerages have reacted with a range of calls and target prices. Bernstein remains relatively constructive, retaining an “outperform” rating and a target of Rs 1,000, suggesting potential for recovery if execution improves. On the other hand, several brokerages have slashed their outlooks, one of them is JP Morgan, which has a bearish target of Rs 550, citing lingering risks from profitability and asset quality.