More Stories

Informist, Wednesday, Apr. 23, 2025

NEW DELHI – IDFC FIRST Bank's net profit for the March quarter is seen almost halving from a year ago because of elevated slippages from the stressed microfinance and unsecured loan portfolios, analysts said. The bank, which will detail its quarterly earnings on Saturday, is expected to post a profit after tax of INR 3.85 billion, 47% lower from a year ago, according to the average of estimates of eight brokerages.

Sequentially, however, the private sector bank's bottom line is seen 13% higher.

In a post-earnings analyst call in January, Managing Director and Chief Executive Officer V. Vaidyanathan had warned the credit cost of the microfinance book would peak in the final quarter of 2024-25 (Apr-Mar) after the bank's Oct-Dec bottom line missed analysts' estimates, dropping 53% on-year as provisions doubled due to stress in the small loan business. Excluding the microfinance portfolio--which began suffering in mid-2024 following massive floods in Tamil Nadu that brought down collection efficiency--IDFC FIRST Bank's credit cost in Oct-Dec was at 1.8%. As of the end of December, the gross non-performing asset ratio of the microfinance book had soared to 4.45% from 2.52% as of Sept. 30, with the credit cost of the book standing at 8% for Apr-Dec, excluding a contingency buffer of INR 3.15 billion.

According to ICICI Securities, IDFC FIRST Bank may see slippages of INR 24.20 billion in Jan-Mar, up from INR 21.92 billion in Oct-Dec. The brokerage has an 'add' rating on the lender with a target price of INR 68. On Wednesday, shares of the bank closed 1.9% higher at INR 68.45 on the National Stock Exchange.

Given the pain of small loans, the private lender has been trimming the said portfolio rapidly. As at the end of December, microfinance loans made up 4.8% of the overall loan book, down from 5.6% as of Sept. 30, even as the total loan book grew 22%. However, the elevated provisions for these loans in conjunction with the shrinking of the book is a double whammy for the bank as it is an "amazingly profitable product", Vaidyanathan had said in January. As such, analysts widely expect the net interest margin of the bank to fall sequentially by 10 basis points to around 5.95%.

Despite the curtailing of its microfinance book, IDFC FIRST Bank's loans and advances were up 20% on year at INR 2.42 trillion as at the end of March, per provisional numbers filed with the exchanges earlier in April. Deposits, meanwhile, were 25% higher at INR 2.43 trillion, with the current account, savings account ratio edging down to 46.9% from 47.7% as on Dec. 31.

On average, analysts see IDFC FIRST Bank's net interest income in Jan-Mar rising 14% on year and 4% sequentially to INR 51.08 billion. According to YES Securities, which has an 'add' rating on the bank with a target price of INR 65, growth in net interest income "will be slightly slower than average loan growth due to fall in yield on advances outpacing cost of deposits".

Following are the Jan-Mar earnings estimates for IDFC FIRST Bank based on reports from eight brokerage firms in descending order of the estimate of net profit:

End

Reported by Siddharth Upasani

Edited by Tanima Banerjee

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

Informist Media Tel +91 (11) 4220-1000

Send comments to feedback@informistmedia.com

© Informist Media Pvt. Ltd. 2025. All rights reserved.