Indusind Bank Faces Margin Squeeze, Asset Quality Concerns In Q1 SEBI RA Says Recovery Hinges On ₹840 Breakout

IndusInd Bank shares gained marginally on Tuesday despite its net profit plunging 72% year-on-year to ₹604 crore for the June quarter (Q1 FY26).

According to the SEBI-registered research firm Financial Sarthis, rising funding costs and a decline in core income significantly impacted performance.

Net interest income dropped to ₹4,640 crore from ₹5,408 crore a year ago, while the all-important net interest margin narrowed to 3.46% from 4.25%, highlighting the squeeze on lending profitability.

Pre-provision operating profit also took a hit, falling to ₹2,568 crore from ₹3,952 crore. Total income saw a modest decline to ₹14,421 crore from ₹14,988 crore. 

On the asset quality front, there was some slippage-gross NPA rose to 3.64% from 3.13% sequentially, and net NPA edged up to 1.12% from 0.95%. 

That said, the bank managed to maintain its provision coverage ratio at 70%.

Loan growth came under pressure, with advances slipping to ₹3.33 lakh crore, while deposits stayed mostly flat at ₹3.97 lakh crore. The CASA ratio, which is often viewed as a sign of deposit quality, dipped slightly to 31.48%.

On a positive note, the bank's capital and liquidity buffers remained healthy. Capital adequacy stood at 16.63% (excluding Q1 profits), and the liquidity coverage ratio was 141%, indicating that near-term funding needs are well covered.

Despite the management's positive outlook, Financial Sarthis flagged several key risks: continued margin compression due to the rising cost of funds, the uptick in NPAs, falling core income, and limited year-on-year growth in both deposits and advances. 

On the technical front, the firm said a breakdown below the ₹800 support level could trigger further downside toward the ₹760–₹750 range. 

For bullish momentum to resume, bulls would need to reclaim the ₹840 level to flip the structure back to positive.

On Stocktwits, retail sentiment was 'bullish' amid 'high' message volume.

IndusInd Bank's stock has declined 17.1% so far in 2025.

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