IDFC First Bank reported a substantial 73 per cent year-on-year decline in its net profit for the second quarter of FY25, posting a profit of Rs 201 crore compared to Rs 751 crore in the same period last year. This decline follows substantial provisions of Rs 568 crore for its microfinance and toll accounts, reflecting industry stress in microfinance and state-imposed toll waivers affecting certain loan portfolios.
Despite the impact on earnings, IDFC First Bank showcased robust performance across its core operational metrics. The bank’s customer deposits recorded a strong 32.4 per cent YoY growth, increasing from Rs 1,64,726 crore in September 2023 to Rs 2,18,026 crore by the end of September 2024. Retail deposits contributed significantly, growing by 37.4 per cent to reach Rs 1,75,300 crore, now constituting 80.4 per cent of total customer deposits. CASA deposits also rose by 37.5 per cent YoY, leading to a stable CASA ratio of 48.9 per cent.
The bank’s loan book expanded 21.5 per cent YoY, reaching Rs 2,22,613 crore as of September 2024. While retail lending grew by 25 per cent, the corporate loan segment, excluding infrastructure, grew by 20 per cent. The legacy infrastructure portfolio saw a 21 per cent reduction, a reflection of the bank’s ongoing strategy to minimise exposure in this segment.
Impact of Provisions on Earnings
The bank’s operating profit remained strong with a 28 per cent YoY growth in core operating profit, reaching Rs 1,857 crore, driven by a 21 per cent increase in Net Interest Income (NII) to Rs 4,788 crore. However, heightened provisions of Rs 568 crore impacted net profitability. This included Rs 315 crore provisioned for the microfinance business and Rs 253 crore for a toll account in Maharashtra affected by recent toll fee waivers.
V. Vaidyanathan, Managing Director and CEO, IDFC First Bank, commented, “Our core drivers are strong with significant growth in deposits, stable asset quality, and improved provision coverage. Despite sectoral challenges, particularly in microfinance, our operating performance remains robust. We’re optimistic about reviving profitability in the coming quarters.
Quality Metrics And Collections
The bank’s asset quality held steady with a Gross NPA of 1.92 per cent and Net NPA at 0.48 per cent as of 30 September 2024. The bank’s Provision Coverage Ratio (PCR) saw an improvement, increasing from 68.18 per cent last year to 75.27 per cent, ensuring a healthier buffer for future contingencies. IDFC First Bank reported collection efficiency in the early retail bucket at a stable 99.5 per cent, although collection efficiency in the microfinance segment slightly reduced from 99.0 per cent in Q1 to 98.6 per cent in Q2.
The microfinance portfolio is undergoing incremental insurance coverage, with 50 per cent currently insured under the CGFMU, a figure expected to reach 75 per cent by March 2025. This development is anticipated to provide a cushion against potential microfinance sector volatility.
Operational Milestones And Strategic Initiatives
In terms of operational growth, the bank’s total credit cards issued crossed the 3 million mark, while its FASTag issuance led the market, with 20 million issued to date. Wealth Management AUM also crossed Rs 20,000 crore, reflecting continued expansion in fee-based services.
Following its recent equity raise of Rs 3,200 crore and the completed merger with IDFC, which added Rs 618 crore to its capital base, IDFC First Bank’s capital adequacy remains robust. As of September 2024, its total CRAR stood at 16.60 per cent, with a CET-1 ratio of 14.08 per cent.
