IndusInd Bank Q2 FY26 Performance Review: Provision Surge Leads to Net Loss

IndusInd Bank reported an unexpected Net Loss of ₹444.8 crore for Q2 FY26, significantly missing the consensus profit estimate of ₹309 crore. This loss is primarily attributed to a massive surge in provisions to ₹2,622.4 crore, up 50.9% QoQ and 44.1% YoY, reflecting accelerated provisioning, particularly in the microfinance (MFI) portfolio, and higher credit costs. Core income metrics were pressured: Net Interest Income (NII) declined 17.5% YoY to ₹4,409.3 crore, and the Net Interest Margin (NIM) compressed to 3.32% from 4.08%. Fee and other income also fell to ₹1,651 crore. Management highlighted that the increased provisions, including ₹872 crore of accelerated QoQ provisions and ₹1,940 crore of write-offs, are a prudent measure to fortify the balance sheet and normalize underlying profitability. Asset quality showed marginal sequential improvement: Gross NPA moderated to 3.60% (from 3.64% in Q1 FY26) and Net NPA to 1.04% (from 1.12%). The Provision Coverage Ratio (PCR) strengthened to 71.81%. Total loan-related provisions stood at 3.2% of the loan book. The bank is taking strategic actions to reduce MFI volatility by tightening underwriting and moderating disbursements. The Capital Adequacy Ratio (CRAR) strengthened to 17.10%, and the Liquidity Coverage Ratio (LCR) averaged 132%, indicating strong capital and liquidity buffers. Advances and deposits saw a YoY contraction, with the CASA ratio at 31%. CEO Rajiv Anand stated that the core Pre-Provision Operating Profit (PPOP) remained stable QoQ at ₹1,940 crore. In summary, the quarter was defined by aggressive provisioning to de-risk the balance sheet, resulting in a net loss, while asset quality stabilized and capital buffers remained robust, positioning the bank for future normalized growth.