IDBI Bank Q2 Profit Drops 39% Due to High NSDL Gains Base

IDBI Bank announced a significant decline in its net profit for the second quarter of the fiscal year 2027, posting ₹2,205 crore, which reflects a 39 per cent decrease compared to ₹3,627 crore in the same quarter last year. This drop is primarily due to a high base effect from a one-time gain of ₹1,699 crore realized from the sale of its stake in the National Securities Depository Limited (NSDL) during the previous year.

When adjusted for this exceptional item, the bank’s net profit actually increased by 14 per cent from ₹1,929 crore in Q2FY26. Sequentially, the net profit rose by 4 per cent from ₹2,115 crore recorded in the first quarter of FY27. This indicates an underlying positive trend in the bank’s core operations despite the year-on-year decline.

Non-interest income, a key revenue stream excluding interest earnings, saw a sharp fall of 46 per cent year-on-year, dropping to ₹1,353 crore from ₹2,489 crore last year, again reflecting the absence of the NSDL-related gain. However, sequentially, non-interest income improved by 31 per cent compared to ₹1,032 crore in the previous quarter, showing signs of recovery.

Operating profit also declined by 18 per cent to ₹2,893 crore from ₹3,523 crore a year earlier. Excluding the one-off NSDL gain, operating profit actually jumped 59 per cent from ₹1,824 crore, further underscoring stronger core profitability. Compared to Q1FY27, operating profit increased by 33 per cent from ₹2,168 crore.

The bank’s net interest income (NII), which measures earnings from lending activities net of interest paid on deposits, surged 29 per cent year-on-year to ₹4,228 crore in Q2FY27 from ₹3,285 crore in Q2FY26. Sequentially, NII was up 21 per cent from ₹3,486 crore in the previous quarter. This growth was driven by a 20 per cent rise in interest income to ₹8,512 crore from ₹7,104 crore last year and a 13 per cent increase from the preceding quarter’s ₹7,541 crore.

IDBI Bank’s net interest margin (NIM), an indicator of profitability on loan assets, improved to 4.11 per cent in Q2FY27 from 3.71 per cent a year ago and 3.61 per cent in the prior quarter. The cost of deposits dropped by 14 basis points to 4.55 per cent year-on-year, while the overall cost of funds fell 17 basis points to 4.65 per cent, reflecting better funding efficiency.

The bank’s cost-to-income ratio, which measures operational efficiency, stood at 48.17 per cent, down from 52.02 per cent in Q1FY27 but higher than 38.99 per cent from the same quarter last year when income was buoyed by the NSDL gain. Return on assets (ROA) was 1.83 per cent, lower than 3.55 per cent in the year-ago period and slightly below 1.89 per cent in the previous quarter. Adjusting for the one-off gain, ROA for last year’s quarter was 1.89 per cent.

Regarding asset quality, the gross non-performing assets (GNPA) ratio improved to 2.12 per cent as of September 30, 2026, down from 2.30 per cent in June 2026 and 2.65 per cent a year prior. The net NPA ratio was 0.17 per cent, slightly higher than 0.16 per cent last quarter but improved from 0.21 per cent a year ago. The provision coverage ratio, including technical write-offs, was stable at 99.24 per cent, close to 99.31 per cent in June and 99.26 per cent a year earlier.

On the business front, IDBI Bank’s total business expanded by 18 per cent year-on-year to ₹6.27 trillion and grew 7 per cent sequentially. Total deposits rose 17 per cent to ₹3.56 trillion, while net advances climbed 18 per cent to ₹2.72 trillion. The composition of gross advances remained weighted towards retail loans, with a 31:69 split between corporate and retail segments.

CASA (current account and savings account) deposits increased 12 per cent year-on-year to ₹1.56 trillion, but the CASA ratio declined by 197 basis points to 43.82 per cent compared to 45.79 per cent a year ago. The ratio slightly improved from 43.64 per cent in the prior quarter. The credit-deposit ratio stood at 76.34 per cent, down from 79.50 per cent last quarter but above 75.88 per cent a year ago.

Capital adequacy remained strong with a ratio of 27.10 per cent at the end of September 2026, up from 25.39 per cent a year earlier and 26.92 per cent in June 2026. The Common Equity Tier-I (CET1) ratio rose to 26.55 per cent from 23.79 per cent a year ago. The bank’s net worth increased by 18 per cent, reaching ₹61,164 crore.

IDBI Bank’s Q2FY27 results illustrate the impact of one-off events on headline profitability but also highlight growth in core banking operations and improving asset quality. As banks navigate a competitive environment and evolving economic conditions, maintaining strong capital buffers and operational efficiency remain crucial. IDBI’s performance fits within the broader trend of Indian banks focusing on retail loan growth and managing asset quality amid changing market dynamics.