Earnings Review
IDFC FIRST Bank Oct-Dec PAT slumps 53% as provisions double
This story was originally published at 17:45 IST on 25 January 2025
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--IDFC FIRST Bank Oct-Dec net profit INR 3.4 bln
--Analysts saw IDFC FIRST Bank's Oct-Dec net profit at INR 4.90 bln
--IDFC FIRST Bank Oct-Dec net profit INR 3.39 bln vs INR 7.16 bln year ago
--IDFC FIRST Bank Oct-Dec total income INR 111.23 bln vs INR 93.96 bln yr ago
--IDFC FIRST Bank Oct-Dec provisions INR 13.38 bln vs INR 6.55 bln year ago
--IDFC FIRST Bank Apr-Dec net profit INR 12.21 bln vs INR 22.32 bln year ago
--IDFC FIRST Bk Apr-Dec total income INR 322.15 bln vs INR 264.63 bln yr ago
--IDFC FIRST Bk: Gross NPA ratio 1.94% as on Dec 31 vs 1.92% qtr ago
--IDFC FIRST Bank: Net NPA ratio 0.52% as on Dec 31 vs 0.48% qtr ago
--IDFC FIRST Bank Basel-III capital adequacy ratio 15.65% as on Dec 31
--IDFC FIRST Bank Oct-Dec NII INR 49.02 bln vs INR 42.87 bln year ago
--IDFC FIRST Bank Oct-Dec NIM at 6.04% vs 6.18% in Jul-Sept
--IDFC FIRST Bank: CASA ratio at 47.7% as on Dec 31 vs 48.9% as on Sept 30
--IDFC FIRST Bank: Oct-Dec cost of funds 6.49% vs 6.46% in Jul-Sept
--IDFC FIRST Bk:Microfinance at 4.8% of total book on Dec 31 vs 5.6% qtr ago
--IDFC FIRST Bank provision coverage ratio at 73.6% as on Dec 31
--IDFC FIRST Bank Oct-Dec cost of deposits 6.38%, unch from Jul-Sept
NEW DELHI – Deterioration in asset quality continued to dog IDFC FIRST Bank, as the private lender on Saturday reported a 52.6?ll in net profit for the quarter ended December as provisions doubled. The bank's bottom line for Oct-Dec was INR 3.39 billion, far from analysts' estimate of INR 4.90 billion. Shares of the bank had closed 1.3% lower on Friday at INR 62.27.
The bank's provisions and contingencies in Oct-Dec were INR 13.38 billion, up 104.3% on year, as gross slippages rose to INR 21.92 billion from INR 1.62 billion in the previous quarter. Much of the increase in the slippages--INR 1.43 billion of INR 1.62 billion--was from the bank's microfinance business.
"The credit issues in Microfinance segment is a transitionary issue which is likely to be resolved within a few quarters. The Bank built this business because it was important from priority sector lending norms point of view, particularly meeting PSL (priority sector lending) norms for Weaker Sections and Small and marginal farmers PSL categories," V. Vaidyanathan, managing director and chief executive officer, was quoted as saying in a release. The bank did not utilise its microfinance provision buffers in Oct-Dec "on a prudent basis".
In terms of ratios, gross non-performing assets ratio rose 2 basis points sequentially to 1.94% as on Dec. 31 but was down 10 bps from a year ago. The net bad loan ratio was up 4 bps on quarter at 0.52%, but down from 0.68% last year. If the microfinance business was excluded, IDFC FIRST Bank said its gross NPA ratio would have been 1.81% as of Dec. 31. Noting the continued pain on the microfinance front, the bank continued to trim the said portfolio and it accounted for 4.8% of the overall loan book as on Dec. 31, down from 5.6% at the end of September. This decline contributed to a 14 bps sequential reduction in the net interest margin for Oct-Dec to 6.04%.
The provision coverage and capital adequacy ratios of the bank stood at 73.6% and 15.65%, respectively, at the end of December.
In Jul-Sept, IDFC FIRST Bank's net profit had crashed 73% on rise in provisions, with the bank setting aside INR 2.53 billion as prudent provisioning buffer for a legacy account related to a Mumbai toll road and another INR 3.15 billion for its microfinance book following massive floods in Tamil Nadu that brought down collection efficiency to 98.6%. On Saturday, the bank said that excluding the microfinance portfolio, the Oct-Dec credit cost was 1.8%, unchanged from Jul-Sept.
Meanwhile, loans and advances were up 22.0% as on Dec. 31 at INR 2.31 trillion, with the retail book growing 21.3% and the corporate non-infrastructure portfolio by 28.9%. Net interest income for the quarter was INR 49.02 billion, slightly below the average of analysts' estimates of INR 49.80 billion. This took the total income for the quarter to INR 111.23 billion, up 18.4% on year, and to INR 322.15 billion for the nine months ended December. The net profit for Apr-Dec was INR 12.21 billion, 45.3% lower from the same period a year ago.
On the deposit side, customer deposits were up 28.8% at INR 2.27 trillion as on Dec. 31, although the current account, savings account ratio slipped to 47.7% from 48.9% as on Sept. 30. While the cost of deposits was stable at 6.38% in Oct-Dec, the cost of funds rose 3 bps to 6.49% from Jul-Sept. End
Reported by Siddharth Upasani
Edited by Ashish Shirke
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