What’s next for IDBI Bank stock after Q2 net profit slumps 39%, massive Fairfax deal? Key factors investors should watch

However, it remains down 18.98% year to date. Q2 Earnings The Life Insurance Corporation of India (LIC)-controlled lender reported a net profit of ₹2,205 crore for the second quarter ended September 2026, compared with ₹3,627 crore in the corresponding period last year. The year-ago profit included a one-time gain of ₹1,698.96 crore from the sale of the bank's strategic investment in National Securities Depository Ltd (NSDL).

IDBI Bank had offered more than 2.22 crore equity shares, representing an 11.11% stake in NSDL, in its initial public offering at an issue price of ₹799.87 per share. Net interest income rises 29% IDBI Bank's total income increased to ₹9,865 crore in the September quarter from ₹9,594 crore a year earlier, according to its regulatory filing. Interest income rose to ₹8,512 crore from ₹7,104 crore in the year-ago quarter.

Net interest income (NII), which represents the difference between interest earned and interest paid, increased 29% to ₹4,228 crore from ₹3,285 crore. However, non-interest income declined 46% to ₹1,353 crore from ₹2,489 crore in the corresponding quarter last year. Operating profit consequently fell to ₹2,893 crore from ₹3,523 crore. The decline in non-interest income and the absence of the previous year's exceptional gain weighed on the bank's reported profitability despite growth in core interest earnings.

Asset quality improves The bank reported an improvement in asset quality during the quarter. Gross non-performing assets (NPAs) declined to 2.12% of gross advances at the end of September 2026 from 2.65% a year earlier. Net NPAs fell to 0.17% from 0.21% over the same period. IDBI Bank has undertaken a significant balance-sheet cleanup in recent years, supported by capital infusion and recoveries that helped reduce bad loans and restore profitability.

Fairfax- IDBI Bank deal The earnings announcement comes days after the government approved the sale of a combined 60.72% stake in IDBI Bank to Fairfax Financial Holdings, led by Canadian billionaire Prem Watsa. The proposed transaction, approved on October 14, is valued at approximately ₹52,878 crore, or around $5.5 billion. It involves the sale of the government's 30.48% stake for about ₹26,620 crore and LIC's 30.24% holding for approximately ₹26,440 crore.

Fairfax will pay ₹81 per share, above the benchmark fair value of ₹75.99 determined by two independent valuation agencies. The disinvestment process began in 2022 but faced a setback earlier this year after initial bids fell below the government's reserve price. The transaction is expected to be completed before the end of the current financial year. The deal would represent a major milestone in India's banking privatisation efforts and a significant foreign investment in the domestic banking sector.

Finance Ministry clarifies legal positionOn Saturday, the Finance Ministry said there was no legal restriction under the IDBI (Repeal) Act, 2003, preventing the government from reducing or selling its stake in the bank.The ministry cited a 2018 Delhi High Court judgment that upheld the Centre's authority to dilute its shareholding.Watsa bets on IDBI payoffMeanwhile, Watsa is betting on India's economic growth and the bank's transformation to generate long-term returns from the acquisition.

Known for his value-investing approach, he told The Economic Times that India's prime minister would make the country “more business friendly”“You’re going to get an economic boom in India for the next 10 years, I think, of very significant proportions,” he said.