IndusInd Bank Ltd Q1 FY2027 Concall Summary

Key Takeaways

• Turnaround quarter, exit ROA commitment held: Profit after tax jumped to ₹1,037 crores from ₹594 crores QoQ, and management stood by its guidance of growing in line with the market this year with an exit ROA of 1%.
• Asset quality repair is working: Annualized net slippage improved to 1.5% from 2.43% YoY, with microfinance slippages moderating sharply and consumer banking risk costs nearing the end of their cycle.
• Deposit franchise hit an inflection: Retail deposit share as per LCR reached an all-time high of 49.5%, cost of deposits fell 12 bps QoQ, and management called this the beginning of a multi-quarter quality-and-quantity improvement journey.
• Growth engines are restarting, not yet roaring: Wholesale advances grew 7% QoQ after a long optimization, retail asset disbursements rose 18% QoQ, and microfinance is pivoting from repair to growth, but the loan mix shift toward wholesale this quarter compressed NIM by 4 bps.
• What to watch next quarter: Whether the promised Q2 microfinance disbursement actualization materializes, the pace of NIM recovery as high-yielding businesses restart, and any decision on the ₹10,000 crore enabling capital resolution.

Asset Quality: The Repair Phase Nears Completion

• Microfinance turned the corner: Gross slippages fell to ₹191 crores from ₹884 crores YoY and ₹504 crores QoQ; the 31-90 DPD book declined to 0.6% from 2.2% YoY and 0.9% QoQ. Write-offs of ₹1,435 crores were undertaken to clean the book.
• Consumer banking risk cycle ending: Annualized net slippage improved to 4.19% from 5.76% YoY and 4.22% QoQ; management stated that slippages in personal loans and credit cards are at the tail end of risk flowing through and that risk costs will come much more in control.
• Vehicle finance seasonality, not structural: Annualized net slippage improved to 2.01% from 2.29% YoY; the QoQ uptick was attributed to Q1 cyclicality, and management expects the usual H2 improvement. Two-wheeler and tractor portfolios remain the pockets of concern.
• Wholesale book stayed pristine: Annualized gross slippage at 0.17%, net at 0.09%, with the proportion of A-and-above-rated customers steady at 82%.
• Early-warning indicators reinforced the trend: SMA1 and SMA2 book fell to 11 bps from 17 bps QoQ; net security receipts declined to 7 bps from 8 bps; the restructured book declined to 5 bps from 6 bps.

Damania: "The delta has really come from credit costs -- lower credit costs and lower expenses, and therefore PPOP to credit cost has been 60/40 really in that first-quarter journey. And I think that will pretty much continue for the rest of the year as well."

Deposit Franchise: The Beginning of a Structural Shift

• Retail deposit share hit a record: Average retail deposits grew 4% QoQ, and the share of retail deposits as per LCR improved to 49.5% from 47.9% QoQ, the highest-ever level.
• Cost of deposits began to fall: Cost of deposits improved by 12 bps QoQ to 5.95%, driven by improving deposit mix and optimization initiatives, with both savings account and term deposit repricing moving downwards.
• The ambition is to close a ~150 bps gap: Management stated the aim is to continue closing the cost-of-funds gap versus the closest peer over the medium term, through both repricing and a mix change toward more retail and HBC deposits.
• Lumpy SA balances were deliberately shed: SA balances declined over the last 5-6 quarters because lumpy SA balances and relatively higher-cost dollar balances out of GIFT City were allowed to run off; the intent is to replace them with more granular SA balances starting in coming quarters.
• LCR improved materially: Average LCR rose to 127% from 118% QoQ, providing a stronger liquidity buffer.
• The liability starting point is acknowledged as weaker: Management is working on multiple engines to strengthen the franchise, describing the liability side as relatively weaker compared to the asset side.

Anand: "I think there is still a lot of work that we need to do on the deposit side, both on quantity and quality. I think what we are beginning to see -- what we are seeing is really the beginning of that journey."

Growth Restart: Engines Firing, Mix Creating NIM Drag

• Wholesale book inflected after a long optimization: Average wholesale loan book grew 7% QoQ, with growth broad-based across mid-market, large corporate, and institutional banking. The wholesale share of the loan mix rose from 34% to 36%, contributing roughly 2 bps of the 4 bps NIM compression.
• Retail asset disbursements turned the corner: Disbursements grew 16% QoQ as actions taken over recent quarters began to gain traction; traditional retail asset businesses that had been de-growing for 12-18 months saw disbursements rise 18% QoQ. Secured lending led the way: home loans grew 38% YoY, gold loans crossed ₹1,200 crores. Unsecured lending continued to de-grow, with personal loans down 4% QoQ and credit cards down 3% QoQ.
• Microfinance is pivoting from repair to growth: Micro loan disbursements were broadly flat QoQ at ₹5,200 crores despite a seasonally weaker Q1; management expects meaningful actualization from Q2 onwards. The overall micro loan book declined 3% QoQ.
• Vehicle finance ex-two-wheelers is accelerating: Disbursements excluding two-wheelers grew 3% YoY; overall disbursements fell 4% YoY due to continued calibration of two-wheeler distribution and underwriting. The medium-term ambition is to regain lost market share.
• SME is being positioned as a major growth vector: LAP portfolio grew 8% QoQ, business loans grew 4% QoQ; management launched several initiatives around transaction banking, trade finance, and supply chain solutions, and intends to grow SME significantly faster than the current pace.
• The loan mix target over three years: Wholesale mix to drop; within wholesale, greater focus on SME, mid-corporate, and large corporate, less on the strategic side; all other businesses will grow much faster than wholesale.

Anand: "We will pick and choose those transactions that make sense for us from a risk and return perspective. What is also very important to us is reciprocity, meaning that we will do transactions where the probability of getting reciprocal transactions, meaning transaction banking, current account floats, payment of GST, salary accounts, etc. The probability of that is higher than the others."

NIM, Fees, and the ROA Bridge

• NIM compressed 4 bps on loan mix, not margin pressure: Normalized NIM at 3.35% versus 3.39% QoQ; the decline was driven primarily by the shift in portfolio mix toward wholesale banking and secured retail assets, partly offset by the improvement in cost of deposits. Lower yield on advances and lower cost of deposits largely offset each other.
• Short-term NIM outlook is a shallow U: Management expects some pressure in Q2, then a recovery starting Q3 and Q4 as high-yielding businesses restart and the loan mix improves. On the 1% ROA journey, NIM is described as a much smaller contributor; beyond that, NIM is an opportunity.
• Fee income has ample headroom: Core fees grew 4% QoQ to ₹1,787 crores, supported by improved business momentum. Corporate and SME fee grew 28% QoQ. Two machines have been stuck for 18 months: credit card fees and retail asset processing fees; both are expected to kick in as those businesses start to grow. Management is also reviewing fees relative to peers, reducing locker vacancies, and building distribution income.
• The ROA bridge is 60/40 PPOP to credit costs: The journey to 1% ROA is split roughly 60% from PPOP improvement and 40% from lower credit costs. Within PPOP, building blocks may change by quarter: NIM was lower this quarter but is expected to come back, and expenses will start growing in subsequent quarters as businesses pick up.
• Operating leverage is a big focus area: Operating expenses declined 2% QoQ to ₹3,698 crores, reflecting ongoing cost optimization and lower regulatory costs. Other expenses fell sharply, down 8% QoQ, driven by lower statutory costs (DICGC, PSLC, CSR), operating efficiency drives, and lower transaction-related costs. The plan is to keep optimizing fixed operating expenses and redeploy toward people cost and IT investment.

Portfolio Strategy: A Deliberate Shift in Risk and Return

• The bank is moving away from its traditional model: Management explicitly stated it is shifting from the old IndusInd Bank model of high cost of deposits plus a riskier portfolio to a more balanced portfolio that is more predictable from a profitability and ROE perspective.
• Deposit strategy is built on primary banking relationships: The focus is on deepening relationships across retail, affluent, NRI, SME, and entrepreneur segments; bid-out deposits will be used only tactically based on asset growth. Outflow rates illustrate the difference: retail at 5%, institutional at 25-40%.
• Consumer banking is pivoting toward secured lending: The medium-term strategy is to scale secured lending (mortgages, gold loans, asset-backed products) while continuing to grow unsecured portfolios through analytics-driven acquisition and cross-sell. The leadership team has been strengthened with experienced talent that has built large-scale retail asset franchises.
• The rural business is being repositioned beyond microfinance: Straight microfinance is ~7% of the book; Bharat Super Shop can do 3-4%; other rural products like MicroLAP and affordable housing can add another 3-4%. Affordable housing grew 21% YoY, and merchant finance grew 11% YoY.

Anand: "We are actually moving away from the more traditional IndusInd bank model of high cost of deposits and a riskier portfolio to a more balanced portfolio which is more predictable from a profitability and ROE perspective."

Capital, ECL, and Regulatory Transition

• Capital raise is an enabling resolution, not an imminent plan: The board passed an enabling resolution for ₹10,000 crores of equity capital raise; management stated there is no immediate plan to raise, describing the CET1 position at 16.2-16.1% as strong. The need for capital will be continually assessed.
• ECL transition carries a one-time impact of 1-1.5% of the loan book: The flow impact is expected to be marginal; the EIR impact from fees and expenses getting dipped still needs to be firmed up. Offsets are available from Basel guidelines changing effective 1 April 2027, which will give something back on capital.
• The portfolio is still changing, so ECL estimates will true up: Management cautioned that it is still early days and the portfolio composition by March will determine the final impact.

Damania: "It's still early days and the portfolio is also changing, right? How it is by March is something we'll have to watch."

Guidance & Commitments

Key Metrics