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Balance sheet de-risking progressing well

IIB saw good quarter as NII was in-line that did not contain any one-offs while asset quality improved. As loan growth is yet to pick-up, fee was a miss. Overall slippage fell by 29% QoQ to 212bps & MFI slippage was down ~50% QoQ that led to lower provisions at 1.80% (PLe 2.36%). Balance sheet de-risking is progressing well with share of large corp./MFI declining to 43%/5% from 48%/9% YoY. 57% of MFI portfolio is covered under CGFMU credit guarantee (38% as of Dec’25). As bank is targeting system level credit growth in FY27, deposit accretion remains a key monitorable. We keep multiple at 1.0x on FY28 ABV and maintain TP at INR 960. Retain ‘ACCUMULATE’.

Good quarter; slight miss on fees offset by better asset quality:

NII was 1.2% lower at INR 43.7bn (PLe INR 44.2bn); NIM (calc.) was largely in-line at 3.47% (PLe 3.5%); reported NIM was steady QoQ to 3.39%. Loan/deposit growth were in-line at -8.4% and -2.7% YoY. LDR fell to 78.9% (80.6% in Q3’26). CASA ratio was up QoQ to 31.2% from 30.2%. Other inc. was lower at INR 17.1bn (PLe INR 17.9bn) due to 8.2% miss on fees. Opex at INR 38.6bn was 4.6% lower as both staff cost and other opex were lower. Core PPoP was in-line at INR 20.3bn; PPoP was INR 22.2bn. Asset quality was better; GNPA was lesser at 3.4% (PLe 3.55%) as gross slippage was INR 18.3bn (PLe INR 23.4bn). Provisions were INR 14.8bn (Ple INR 19.5bn). Core PAT was ahead of PLe at INR 4.0bn (PLe INR 596mn); PAT was INR 5.3bn (PLe INR 2.3bn).

Pace of loan contraction moderating:

Credit decline is being arrested as sequential fall has reduced to 0.5% QoQ (-2.6% in Q3’26). Loan accretion QoQ was supported by Govt. banking, VF and SME. Bank guided for FY27 loan growth to be in-line with system. Corporate de-growth is largely complete; focus would be on improving portfolio granularity by reallocating exposure from large corporates to mid-market & SME. Deposit growth remains a key constraint to loan growth; bank indicated internal levers to drive deposit growth including organizational restructuring, incentive changes, digital improvements, and cross-sell from retail asset growth.

Asset quality improves in MFI:

Overall slippage ratio fell by 85bps QoQ to 2.1%; MFI slippage reduced QoQ to INR 5.0bn from INR 10.2bn. 31-90 dpd pool declined QoQ to 0.9% from 2.4%. Disbursals were up to INR 54bn, +52% QoQ. Hence, pace of MFI loan contraction moderated, and QoQ fall was largely driven by write-off. 57% of MFI portfolio is covered under CGFMU credit guarantee (38% as of Dec’25). Quarter Summary

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