IndusInd Bank Q4 Loss Prediction: IndusInd may slip into red in Q4 on derivative losses

Mumbai: Private sector lender IndusInd Bank is bracing for a significant decline in profitability-or potentially a net loss-for the March quarter, following a one-time charge of ₹1,959 crore related to losses in its derivatives portfolio. Analysts estimate the bank could report a net loss between ₹300 crore and ₹600 crore, unless it decides to absorb part of the impact using its contingent provision buffers. In comparison, the bank posted a net profit of ₹2,347 crore in the same quarter last year.

“The recognition of this accounting discrepancy will lead to a loss in the March quarter,” said Nitin Aggarwal, head, BFSI at Motilal Oswal Securities. “We also expect modest business growth, continued asset quality pressure, and elevated credit costs.”

On Sunday evening, IndusInd confirmed it would fully absorb the derivatives-related loss this quarter, following the conclusion of a board-mandated investigation into accounting irregularities in internal derivative transactions. An independent firm, appointed on March 20, found that early termination of derivative contracts had been incorrectly booked, artificially boosting notional profits and distorting financial results.

“Recognition of derivative accounting loss could push the bank into a loss, unless it utilises its contingent buffer with approval of the board,” said Emkay Global analyst Anand Dama. “Slippages could also inch up due to accelerated stress in the microfinance pool.”

As of December 2024, IndusInd held ₹1,325 crore in standard contingent provisions-an amount outside its 70% provision coverage ratio. Brokerages broadly expect subdued operational performance in Q4. YES Securities forecasts sequential loan growth of 3.5%, attributing it to idiosyncratic drivers. However, net interest income is likely to see tepid growth, as falling loan yields are expected to outpace rising funding costs.

Bunty Chawla of IDBI Capital projects an 8.3% year-on-year and 5.7% quarter-on-quarter drop in NII, citing muted 1% annual loan growth and 6.8% growth in deposits. Weak performance in the microfinance and vehicle finance segments is expected to weigh down overall loan expansion.The issue first surfaced on March 10, when IndusInd disclosed that mark-to-market losses in its derivatives book could erode up to 2.35% of its net worth as of December 2024-roughly ₹1,600 crore. The announcement rattled investors, leading to a nearly 25% drop in the stock price from ₹900 to ₹686. As of Monday’s close, shares had recovered somewhat to ₹830.45.Subsequently, the bank appointed PwC to assess the derivative losses first flagged in October 2024. In parallel, Grant Thornton Bharat was engaged last month to carry out a forensic investigation, following a directive from the Reserve Bank of India.