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Informist, Friday, Jul. 25, 2025

By Aaryan Khanna

NEW DELHI – IDFC FIRST Bank Ltd.'s profit after tax for the June quarter is expected to fall, the seventh straight quarter of on-year decline, which is in line with the management's commentary after the March quarter's earnings. That headline seems to be the only consensus, with other portions of the estimates anything but.

The private sector bank's bottom line is likely to nearly halve on year to INR 3.48 billion, according to the average of estimates from seven brokerages. However, the net profit is seen 14.6% higher from the trailing quarter. What is striking is the range – estimates for IDFC FIRST Bank's net profit for the reporting quarter range from INR 2.10 billion to INR 4.71 billion. Three of the estimates expect a quarterly fall in the net profit. The bank will detail its Apr-Jun earnings Saturday.

Stress in the microfinance business and provisioning on those bad loans had marred the bank's profitability in 2024-25 (Apr-Mar), with the net profit falling to INR 15.25 billion from INR 29.57 billion in FY24. The bank's management – led by Chief Executive Officer V. Vaidyanathan – had told analysts in April to expect another fall in profit annually in the June quarter, before a smart recovery in the subsequent reporting periods.

Slippages, particularly from the microfinance business, are expected to remain high. ICICI Securities Ltd. projects the June quarter slippages at INR 23 billion, up 39% on year and 5.7% on quarter. The bank has been trimming its microfinance portfolio, which made up only 4% of the total loan book as of Mar. 31 from 6.6% a year ago.

"Fresh slippages in 1QFY26 (Apr-Jun) would remain elevated for banks with high exposure to unsecured retail and microfinance viz. IDFCFB (IDFC FIRST Bank)... but may be flattish compared with already elevated levels seen in 4QFY25 (Jan-Mar)," YES Securities (India) Ltd. said in a note.

The company's net interest income--the difference between interest earned and expended--is seen rising 8.0% on year and 3.3% on quarter to INR 50.69 billion in the June quarter, according to the average of estimates from the seven brokerages. YES Securities said falling yields on advances will outpace benefits from the fall in cost of deposits, keeping net interest income subdued. Centrum Broking Ltd. expects yields to be stable and lower cost of funds to immediately benefit the bank in the reporting quarter.

Nuvama Wealth Management Ltd. sees provisions at INR 15.50 billion in the reporting quarter, up from INR 14.50 billion in the trailing quarter and INR 9.94 billion a year ago. This is likely to depress the bottom line even as other income rises, including a ten-fold increase in trading gains on year to INR 2.0 billion, Nuvama said.

Still, Emkay Global Financial Services Ltd. contends that the high-yielding microfinance book is likely to protect the bank's margin better than for its peers. It sees net interest margins contracting only 9 bps from the March quarter's 5.95%. Centrum also expected lower provisioning and sees IDFC FIRST Bank delivering a notable improvement in performance. Moreover, 60% of the bank's loans are fixed rate and only 30% are linked to an external benchmark, among the lowest in the industry. This is likely to protect the bank's margin from the impact of the 100-bps of policy repo rate cuts between February and June as compared to other banks.

"We expect profitability to be better QoQ (quarter-on-quarter) due to better growth and some moderation in LLP (loan loss provisions)," Emkay wrote in a pre-earnings note. "Slippages to remain elevated due to stress in MFI (microfinance), Cards." The brokerage was the most optimistic on the lender's bottom line.

On the other side of the spectrum, ICICI Securities said the sluggish growth in the microfinance book will hurt margins. Nuvama sees the net interest margin contracting 25 bps on quarter and over 50 bps from the year-ago period to 5.70% in the June quarter. Despite this, and its dismal outlook on the bank's net profit, Nuvama said the stock was a "result-based BUY".

Analysts will monitor the bank's commentary on business growth. Vaidyanathan had said after the March quarter earnings that the bank would continue to prioritise business growth, with the board approving a INR-75-billion capital raise in April from private equity firms. On an annualised pace, analysts expect deposits to rise around 25% at the end of the latest quarter to INR 2.62 trillion, while loans are expected to grow around 20% on year to INR 2.47 trillion by June-end. The pace of increase would be in line with that seen in the last two quarters.

Nine brokerages have a "buy" rating on the company with an average target price of INR 84 per share while three brokerage have a 'hold' rating with an average target price of INR 69. Two brokerages have a 'sell' rating on the lender with a target price of INR 57. At 1108 IST, IDFC FIRST Bank's shares were 1.8% lower at INR 71.12 on the National Stock Exchange. The bank's shares have risen 7.6% since its March quarter earnings.

Following are the Apr-Jun earnings estimates of IDFC FIRST Bank Ltd. based on reports from seven brokerages in descending order of the estimate of net profit:

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Edited by Tanima Banerjee

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