IndusInd Bank's Q2 FY25 Profit Declines Sharply Amid Rising NPAs, Stock Plummets 18%

Following the release of the institution's quarterly results after market hours on Thursday, shares of private sector lender IndusInd Bank Ltd. dropped as much as 18% on Friday, October 25. For the second quarter of FY25, IndusInd Bank reported a sharp decline in its consolidated net profit, which dropped 39.5% year over year to ₹1,331 crore. The bank reported a net profit of ₹2,181 crore for the same period previous year.

During the July-September quarter, the bank's net interest income (NII), a crucial measure of profitability, increased 5% year over year to ₹5,347 crore from ₹5,077 crore during the same period the previous year. The total profit decreased in spite of the increase in NII, suggesting pressure on other financial indicators. But NII's growth fell short of what the market had anticipated.

A crucial measure of profitability, the bank's net interest margin (NIM), dropped from 4.29% to 4.08% during the same time last year, suggesting some pressure on margins.
During the June quarter, IndusInd Bank's asset quality declined. While Net NPA was at 0.64% from 0.6% in June, Gross NPA was at 2.11% from 2.02%. Gross non-performing assets (NPA) rose from ₹7,126.8 crore to ₹7,638.5 crore in June, while net non-performing assets (NPA) rose from ₹2,095 crore to ₹2,282 crore. At ₹1,820.1 crore, provisions rose 87% from the previous year and even 73% from the June quarter. At ₹3,599 crore, operating profit also fell 7.2% from the previous year and by over 9% on a sequential basis.

IndusInd Bank reported loan growth of 13% year-over-year to ₹3.57 lakh billion, despite the decline in earnings. Strong increase was also seen in deposits, which rose 15% to ₹4.12 lakh crore.
Nomura has kept its "neutral" position on the company and lowered its price objective from ₹1,580 to ₹1,220. This quarter was deemed bad by the firm, and the outlook was seen as "challenging." It has lowered its previous 14% Return on Equity (RoE) projections to 11–13% for the fiscal years 2025 and 2027. However, it stated that because values are "benign," the absolute downside is minimal.

With a price objective of ₹1,690, Macquarie has kept its "outperform" rating on the stock. However, it stated that the MFI book's asset quality problems are getting worse and that there is a risk to the company's 1.8% Return on Asset (RoA) projection for the fiscal year 2025. Citi lowered its price target from ₹2,010 to ₹1,630, although it kept its "buy" rating on the lender. Since it is now factoring in slower loan growth and moderate fees, the lender's profits estimate for the fiscal year 2025–2027 has been reduced by 18% to 22%.

Out of the fifty analysts that cover IndusInd Bank, forty-one still have a "buy" rating for the company, eight say "hold," and one says "sell." IndusInd Bank shares are now trading at ₹1,053.05. This is an 18% gain.

To Summarize

IndusInd Bank's Q2 FY25 results revealed a significant 39.5% YoY drop in net profit to ₹1,331 crore, despite a 5% rise in net interest income (NII) to ₹5,347 crore. Net interest margin (NIM) declined from 4.29% to 4.08%, indicating pressure on profitability. Rising provisions, which surged 87% YoY, and worsening asset quality contributed to the fall, with Gross NPA increasing to 2.11%. The stock fell 18% post-announcement, and analysts like Nomura and Citi have lowered their price targets, highlighting challenges in the bank's outlook.