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Informist, Saturday, Jul. 26, 2025

--IDFC First Bank Apr-Jun net profit INR 4.63 bln 
--Analysts saw IDFC First Bank Apr-Jun net profit at INR 3.48 bln 
--IDFC First Bank Apr-Jun net profit INR 4.63 bln vs INR 6.81 bln year ago 
--IDFC First Bk Apr-Jun total income INR 118.69 bln vs INR 104.08 bln yr ago 
--IDFC First Bank Apr-Jun provisions INR 16.59 bln vs INR 9.94 bln year ago
--IDFC First Bk gross NPAs 1.97% as on Jun 30 vs 1.87% qtr ago, 1.90% yr ago
--IDFC First Bk net NPAs 0.55% as on Jun 30 vs 0.53% qtr ago, 0.59% yr ago
--IDFC First Bank Basel-III capital adequacy ratio 14.86% as on Jun 30 
--IDFC First Bank Apr-Jun net interest income INR 49.33 bln, up 5.1% YoY 
--IDFC First Bank: CASA ratio 48.0% as on Jun 30 vs 46.6% yr ago 
--IDFC First Bank: Provision Coverage Ratio 72.3% as on Jun 30 
--IDFC First Bk loans and advances INR 2.53 tln as on Jun 30, up 21% on year 
--IDFC First Bk: Microfinance 3.3% of total book on Jun 30 vs 6.3% year ago
--IDFC First Bk retail, rural, MSME book INR 2.04 tln on Jun 30, up 17.4% YoY 
--IDFC First Bank Apr-Jun net interest margin 5.71% vs 5.95% qtr ago 

By Aaryan Khanna

NEW DELHI – A sharp rise in other income helped IDFC FIRST Bank surpass Street's estimate for June quarter net profit, even though it fell on year as expected for the seventh straight quarter. Net interest income fell short of analysts' expectations, and a sharp rise in provisions continued to weigh on profitability.

The private sector bank's net profit fell 32% on year to INR 4.63 billion, but was well above the average of estimates of INR 3.48 billion from seven brokerages. Sequentially, the bottom line rose by over 50%.

The bank's other income for the quarter grew 38% on year to INR 22.27 billion, helped by trading gains from the treasury segment, with fee income growing in single digits. Treasury income nearly quadrupled on year to INR 6.16 billion amid a sharp fall in bond yields during the June quarter after the Reserve Bank of India's Monetary Policy Committee cut the policy repo rate by 100 bps since February and the central bank bought bonds through open market operations. Fee and other income during the quarter were up 8.5% at INR 17.31 billion, the bank said in a release.

The bank's net interest income--the difference between interest earned and expended--rose 5.1% on year to INR 49.33 billion. Analysts had expected it to rise 8% to INR 50.69 billion. Provisions also topped the upper end of analyst estimates. The bank provisions for the quarter were INR 16.59 billion, up from INR 9.94 billion a year ago, and against the highest estimate of INR 15.5 billion from the brokerages.

The provisions likely rose as asset quality continued to take a beating. The bank's gross non-performing asset ratio rose to 1.97% as on Jun. 30, from 1.87% a quarter ago and 1.90% a year ago. Net NPAs were kept in check by the higher provisioning over the last four quarters. The net NPA ratio was 0.55% as on Jun. 30, against 0.53% a quarter ago and 0.59% a year ago.

"Considering the increase in delinquency of the micro-finance business across the industry, the bank is tracking the microfinance business closely," IDFC FIRST Bank said in a release. "The asset quality indicators, including gross NPA, net NPA, SMA, and Provisions of the book excluding MFI are stable." The bank's struggling microfinance portfolio fell 36.9% on year to INR 83.54 billion and its proportion to the total funded assets declined to 3.3% as on Jun. 30 from 6.3% a year ago and 4.0% a quarter ago.

The bank's net interest margin shrank sharply, hurt by the repricing of loans after the repo rate reduction, the decline in investment yields as well as the fall in the loan book of the high-yielding microfinance business. The net interest margin fell to 5.71% in the June quarter, down 24 basis points from the trailing quarter. The decline was in line with the most pessimistic estimate among analysts, even though only 30% of the bank's loans are linked to external benchmarks.

Even with the fall in microfinance loans, total advances grew 21% on year to INR 2.53 trillion as of Jun. 30, led by the wholesale book. The pace of growth in the rural, retail and micro, small and medium enterprise book was slower at 17.4% on year. However, this segment is the largest among the portfolio, at INR 1.74 trillion.

The bank said 72% of its microfinance loans were covered by insurance as of Jun. 30. Incremental disbursements in the portfolio were being insured under the central government's Credit Guarantee Fund for Micro Units scheme.

Meanwhile, total deposits rose 25.5% on year to INR 2.57 trillion as at June-end. Retail deposits rose at a similar pace and made up 80% of the deposit base at INR 2.04 trillion. The low-cost current-account-savings-account ratio grew to 48.0% as on Jun. 30, up from 46.9% a quarter ago and 46.6% a year ago. The bank's business growth on both assets and liabilities was in line with analyst estimates.

The bank's total income for the June quarter was 14% higher at INR 118.69 billion while total expenses rose 13% to INR 96.30 billion. This led to operating profit increasing 19.0% on year and nearly 24% on quarter to INR 22.39 billion.

The bank reported a Basel-III capital adequacy ratio of 14.86% as at June-end, down from 15.48% a quarter ago and 15.59% a year ago. Including profits, the ratio was 15.01% as on Jun. 30. After the March quarter earnings, the lender's board in April had approved a capital raise of INR 75 billion from two private equity firms. Including the fresh capital infusion, the bank's capital adequacy ratio would have been 17.60% as of Jun. 30, and its common equity tier-I ratio would have been 15.38%, excluding profits.

The bank's provision coverage ratio was 72.3% at June-end, unchanged from the March quarter. Including technical write-offs, the provision coverage ratio was 91%, the bank said. IDFC FIRST Bank's shares Friday ended down 3% at INR 70.70 on the National Stock Exchange.  End

Edited by Ashish Shirke

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