IndusInd Bank Q2: Back to Profit, Margin Still Slipping
IndusInd Bank made a net profit of ₹1,242 crore in the September quarter, against a loss of ₹437 crore a year earlier. Most of the swing came from provisions, which fell by more than half, and from other income, up 36%. The core business is less settled: net interest income grew 4%, the margin fell to 3.23%, and savings deposits shrank 5% from a year ago. A return on equity of 7.37% is better than last year, and still low for a private bank.
The quarter in numbers
| Consolidated, ₹ crore | Q2 FY27 | Q2 FY26 | Change | Source |
|---|---|---|---|---|
| Net interest income | 4,569 | 4,409 | 4% | [I] |
| Other income | 2,248 | 1,651 | 36% | [I] |
| Operating expenses | 3,943 | 4,013 | (2)% | [I] |
| Operating profit | 2,874 | 2,047 | 40% | [I] |
| Provisions and contingencies | 1,223 | 2,631 | (54)% | [I] |
| Profit after tax | 1,242 | (437) | NM | [I] |
Against June, profit rose 20% from ₹1,037 crore in the presentation's table ([I]); the press release instead calls it "up by 51% QoQ against normalized profit of ₹824 crores for Q1 FY 27" ([P]). The filings do not explain the normalisation.
Bad loans: the improving part
Gross NPA fell to 2.73% from 3.25% in June, and net NPA to 0.83% from 0.95% ([P]). The presentation shows loans in the SMA-1 and SMA-2 early-warning buckets at 0.05%, against 0.12% in June, and describes "Continued moderation in stress pools with lower slippages" ([I]). The provision coverage ratio slipped to 70.19% ([P]).
The margin: the part still slipping
The net interest margin was 3.23%, against 3.32% a year ago ([P]) and 3.57% in June ([I]). The bank attributes the fall to dollar deposits: "NIM Impact coming from FCNR (B) mobilization" ([I]). Banks raised these foreign-currency deposits in the quarter, and the money parked in liquid assets earns little at first. The balance sheet shows the effect: loans rose 11% in the quarter to ₹3,63,104 crore and borrowings 23% to ₹53,781 crore ([I]).
The deposit mix is the deeper issue for a bank's moat:
| ₹ crore, 30 Sep | 2026 | 2025 | Change | Source |
|---|---|---|---|---|
| Current accounts | 36,742 | 31,916 | 15% | [I] |
| Savings accounts | 83,024 | 87,854 | (5)% | [I] |
| Total deposits | 4,28,832 | 3,89,600 | 10% | [I] |
CASA, current and savings accounts together, was 27.93% of deposits ([P]). Savings balances are the cheapest money a bank has, and IndusInd's are shrinking while its total deposits grow.
Moat and margin
Focus moat: the deposit franchise. A bank's lasting edge is cheap, sticky money. IndusInd's savings deposits fell 5% in a year, so growth is being funded by costlier term deposits, borrowings and FCNR money. Until that turns, the margin has less room.
Margin: repaired by provisions, not by spread. Operating profit rose 40%, helped by flat costs and higher other income, and provisions halved. Return on assets was 0.87% and return on equity 7.37% ([I]); last year's quarter was a loss.
MoatSCORE (Moat Screener, deep dive): IndusInd Bank 4.44, AMBER+. For comparison, HDFC Bank 6.04, ICICI Bank 6.05, Kotak Mahindra Bank 6.03 and Axis Bank 5.14 ([MS]).
The bear case
- Spread is narrowing: NII fell 2% from June, and the margin fell 34 basis points in a quarter (our arithmetic, 3.57% to 3.23%).
- Savings deposits are shrinking, by 5% in a year.
- Profit leans on non-core lines: other income rose 36% and provisions fell 54%; neither is guaranteed to repeat.
- Two different "June" profits in the same day's filings, with no reconciliation.
The case for
- Asset quality is improving on every measure the bank gives: gross and net NPA, SMA buckets, restructured book ([I]).
- Costs fell 2% from a year ago while income grew ([I]).
- Capital is adequate, with a total capital ratio of 16.59% and Tier 1 of 15.55% ([P]).
What to watch
- The margin once the FCNR money is lent out.
- Savings-account balances, which fell 5% in the quarter as well as over the year ([I]).
- Whether provisions stay near this quarter's ₹1,223 crore.
Sources
- [P] IndusInd Bank, Q2 FY27 press release (NSE)
- [I] IndusInd Bank, Q2 FY27 investor presentation (NSE)
- [MS] Moat & Margin, Moat Screener and How MoatSCORE works
Educational research, not investment advice. Every figure above is drawn from IndusInd Bank's own filings, read from the primary documents on 24 October 2026; derived figures are our arithmetic, labelled as such. MoatSCORE read live from the Moat Screener on 24 October 2026. No buy/sell recommendations, no price targets, no share prices. Moat & Margin is not a SEBI-registered Research Analyst or Investment Adviser.
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