IndusInd Bank Q3 Preview: Profit may see sharp 39% YoY fall amid rising slippages, margin squeeze

Shares of IndusInd Bank plunged over 33 percent during Q3FY25

After enduring a rough 2024 as the worst-performing Nifty 50 stock, IndusInd Bank is bracing for a steep decline in net profit for the third quarter of FY25. Analysts attribute this to mounting slippages from its microfinance (MFI) portfolio and rising funding costs that is expected to squeeze margins. The bank is scheduled to announce its Q3FY25 results on January 31, 2025.

According to Moneycontrol poll of five brokerages, IndusInd Bank is likely to register 38.6 percent year-on-year (YoY) slump in net profit, bringing it down to Rs 1,411 crore in Q3FY25 from Rs 2,301 crore a year ago. However, net interest income (NII) is expected to see a modest 10 percent YoY growth, reaching Rs 5,833 crore, up from Rs 5,295 crore in Q3FY24.

Estimates of analysts polled by Moneycontrol are shown to be in a diverse range, meaning any positive or negative surprises may elicit a sharp reaction in the stock price. Among the brokerages polled, B&K Securities rolled out the most bullish projections while Sharekhan forecasted the slowest growth for IndusInd Bank.

What factors are driving the earnings?

Sluggish loan growth: According to its Q3 provisional update, IndusInd Bank's loans grew by only 3 percent on a quarter-on-quarter (QoQ) basis and 12 percent YoY to Rs 3.67 lakh crore in Q3FY25. Deposits, on the other hand, surged 11 percent YoY to Rs 3.6 lakh crore in Q3FY25.

Surging loan-loss provisions: With rising slippages in its MFI portfolio, IndusInd Bank’s provisions are expected to nearly triple (up 192 percent YoY) to Rs 2,730 crore in Q3FY25, compared to Rs 934 crore in Q3FY24. Analysts at Kotak Institutional Equities estimate slippages at Rs 3,100 crore, translating to a 3.5 percent slippage ratio for the quarter.

Margin squeeze: The bank's net interest margin (NIM) is projected to contract by 37 basis points YoY, slipping to 4 percent from 4.4 percent in Q3FY24, as higher funding costs take a toll.

What to look out for in the quarterly show?

Market participants will closely track IndusInd Bank’s funding cost trends, operational expense trajectory, and the real-world impact of its MFI portfolio stress.

Shares of IndusInd Bank plunged over 33 percent during Q3FY25, making it the worst Nifty 50 performer of 2024, far underperforming the benchmark Nifty 50 index, which declined 4percent in the same period.