Two private sector bank stocks are in focus after their Q4 results. IDFC First Bank and IndusInd Bank declared their results recently. While both banks have shown margins and asset quality recovery, its been a resilient quarter for IDFC First Bank amid fraud-related overhang.
One bank is sustaining high margins with steady growth, while the other is rebuilding profitability after a stress cycle. The numbers across both institutions show that the operating model has moved away from margin expansion toward execution on asset quality and cost discipline.
IDFC First Bank vs IndusInd Bank: NIMs stabilise as cost tailwinds fade
IDFC First Bank reported a net interest margin of 5.93% in Q4 FY26 compared with 5.75% in Q3 FY26, up 18 bps QoQ, while remaining broadly stable from 5.95% in Q4 FY25, down 2 bps YoY. The improvement was driven by a decline in cost of funds to 6.00% in Q4 FY26 from 6.11% in Q3 FY26.
Despite this, forward estimates indicate limited upside. Brokerage estimates suggest NIM is likely to remain around 6.1% through FY27 to FY29, as benefits from lower funding costs are offset by portfolio mix changes toward retail lending.
IndusInd Bank reported a net interest margin of 3.39% in Q4 FY26 compared with 3.35% in Q3 FY26, up 4 bps QoQ.
On a full-year basis, margins declined to 3.6% in FY26 from 3.8% in FY25, reflecting pressure from lower yields and subdued loan growth.
The margin trajectory across both banks now points to stability rather than expansion, with incremental gains expected to remain limited.
IDFC First Bank vs IndusInd Bank: Credit costs become the key earnings driver
IndusInd Bank’s Q4 FY26 earnings were driven by a sharp decline in provisions. Provisions fell to Rs 1,482 crore in Q4 FY26 from Rs 2,086 crore in Q3 FY26, down 29% QoQ, leading to a significant improvement in profitability.
Profit after tax increased to Rs 594 crore in Q4 FY26 from Rs 128 crore in Q3 FY26.
In the analyst call opening remarks, IndusInd Bank management said:
“Net slippages were down 37% QoQ resulting in lower provisioning during the quarter. Annualized net slippages were at 1.71% versus 2.65% QoQ.”
The management added: “The overall stress book continues to moderate with QoQ decline in Net NPA, Net Security Receipts and Restructured book and these trends give us confidence that credit costs are past their peak, subject to macro stability and seasonality.”
JM Financial noted that calculated credit cost declined 73 bps QoQ, supported by improving asset quality across portfolios.
IDFC First Bank also saw stable underlying profitability despite one-offs. The bank recognised Rs 480 crore toward provisions linked to the Haryana government-related fraud, which impacted reported earnings.
Excluding these impacts, normalized profit after tax rose to Rs 746 crore in Q4 FY26 from Rs 504 crore in Q3 FY26, up 48% QoQ.
The earnings trajectory for both banks is now being driven more by provisioning trends than margin expansion.
IDFC First Bank vs IndusInd Bank: Growth momentum diverges sharply
IDFC First Bank continues to report strong balance sheet growth. Gross advances increased to Rs 2.83 lakh crore as of March 31, 2026 from Rs 2.36 lakh crore as of March 31, 2025, up 20% YoY, while total deposits rose to Rs 2.94 lakh crore from Rs 2.51 lakh crore, up 17% YoY.
The bank remains focused on retail-led growth, with CASA deposits at Rs 1.46 lakh crore and CASA ratio at 49.8% in Q4 FY26.
IndusInd Bank continues to operate in a recalibration phase. Loans declined to Rs 3.15 lakh crore in Q4 FY26 from Rs 3.44 lakh crore in Q4 FY25, down 8% YoY, while average loans declined 2% QoQ.
Deposits declined to Rs 3.99 lakh crore in Q4 FY26 from Rs 4.12 lakh crore in Q4 FY25, down 3% YoY, although they increased 2% QoQ.
| Metric | IDFC First Bank | IndusInd Bank |
|---|---|---|
| NIM | 5.93% | 3.39% |
| QoQ NIM Change | +18 bps | +4 bps |
| PAT (₹ cr) | 746* | 594 |
| Provisions (₹ cr) | 480 | 1,482 |
| Loan Growth YoY | +20% | -8% |
| Deposit Growth YoY | +17% | -3% |
| GNPA | 1.61% | 3.43% |
| NNPA | 0.48% | 1.00% |
| CRAR | 15.60% | 17.48% |
| Credit Cost | ~1.66–1.8% | – |
| RoA (Outlook) | ~1–1.2% | ~1% |
| Growth Outlook | ~20%+ | ~13–14% |
In the analyst call, IndusInd Bank management said:“We remained focused on growing our core retail segments while continuing to optimize the bulk portfolio.”
The management further stated: “Retail d.eposit mobilization, which remains a key priority, saw healthy traction with net additions of Rs 6,800 crore during the quarter.”
The divergence remains clear. IDFC First Bank is expanding its retail franchise, while IndusInd Bank is prioritising balance sheet repair.
IDFC First Bank vs IndusInd Bank: Asset quality trends improve across both banks
IndusInd Bank reported improvement in asset quality, with GNPA declining to 3.43% in Q4 FY26 from 3.56% in Q3 FY26, while NNPA improved to 1.00% from 1.04% QoQ.
Slippages also moderated, with slippage ratio at 2.3% in Q4 FY26 compared with above 3% in Q3 FY26.
IDFC First Bank continues to operate with lower stress levels. GNPA declined to 1.61% in Q4 FY26 from 1.69% in Q3 FY26, while NNPA stood at 0.48%.
Early-stage stress indicators also improved, with SMA 1+2 declining to 0.78% in Q4 FY26, down 10 bps QoQ.
Both banks are seeing improving asset quality, though from very different starting points.
IDFC First Bank vs IndusInd Bank: Capital and dividend stance remain conservative
IDFC First Bank reported a capital adequacy ratio of 15.60% in Q4 FY26, providing sufficient headroom to support growth.
IndusInd Bank maintained a stronger capital position with CRAR at 17.48% and CET1 ratio at 16.20% in Q4 FY26.
Both banks continue to retain earnings to support growth and strengthen their balance sheets, with dividend payout remaining limited.
IDFC First Bank vs IndusInd Bank: Guidance indicates stable margins and improving returns
IDFC First Bank expects credit growth to remain healthy, while margins are likely to stay range-bound due to portfolio mix changes. The bank guides for credit costs at around 1.8%, supporting improvement in return ratios over the medium term.
IndusInd Bank expects loan growth to align with system growth at 13% to 14% in FY27, with return on assets improving toward 1% from 0.45% in Q4 FY26 as credit costs normalise.
The management reiterated during the call that “provisions were down 29% QoQ driven by lower net slippages”, reinforcing that profitability recovery is being led by improving asset quality.
IDFC First Bank vs IndusInd Bank: Brokerage view on valuation and upside
Nomura highlighted that IDFC First Bank delivered a resilient Q4 despite the fraud-related overhang, with net interest income rising 16% YoY and margins surprising positively at 6.01%. The brokerage noted that lower credit costs (1.66%) and improving slippages supported earnings, with adjusted profit coming in 14% above estimates. It also flagged that operating leverage, stable margins, and moderating credit costs are likely to drive earnings momentum over FY27–FY28, maintaining a ‘Buy’ rating with a target price of Rs 85.
JM Financial upgraded IndusInd Bank to ‘Add’ with a target price of Rs 925, implying 9.1% upside from Rs 848.
Emkay maintained a ‘Buy’ rating with a target price of Rs 1,100, implying 29.7% upside.
For IDFC First Bank, Emkay retained an ‘Add’ rating with a target price of Rs 75, implying 11.9% upside from Rs 67.
Earlier coverage maintained a ‘Buy’ rating with a target price of Rs 87, based on expected improvement in return ratios.
Axis Securities noted that IDFC First Bank’s performance remains strong with visible improvement across key operating metrics, supported by robust growth in advances and deposits along with margin expansion. The report highlights that credit and deposit growth is expected to sustain at ~21–23% CAGR over FY26–FY28, while operating leverage and better cost control should drive a gradual decline in cost-to-income ratios. Additionally, easing credit costs and improving asset quality are likely to support profitability, with RoA projected to improve to ~1–1.2% by FY28, reinforcing the brokerage’s positive outlook and BUY recommendation on the stock.
Conclusion
The Q4 FY26 earnings from IDFC First Bank and IndusInd Bank show that margins are no longer the primary driver of profitability. While IDFC First Bank is sustaining high margins with steady growth, IndusInd Bank is rebuilding profitability through lower credit costs. The broader trend across both banks indicates that earnings growth is now increasingly dependent on asset quality, cost discipline, and execution rather than margin expansion.
Source:FinancialExpress
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