IDFC First Bank Reports Q3FY25 Earnings: Profit Drops 53%, But Deposits and Loans See Steady Growth
IDFC First Bank has announced its financial results for the October-December quarter of fiscal 2024-25 (Q3FY25) on January 25, 2025. The bank’s standalone net profit saw a sharp drop of 53%, falling to ₹339.4 crore from ₹715.7 crore during the same period last year. This decline was primarily driven by higher provisions due to an increase in loan slippages.
Impact of Microfinance Business on Earnings
The bank attributed the decline in profit to several factors, including slower disbursal of microfinance (MF) loans, an increase in microfinance provisions, and the normalization of credit costs in its non-microfinance businesses. Despite these challenges, IDFC First Bank reported growth in key areas.
Key Metrics
- Net Interest Income (NII): The bank’s NII rose 14.4% to ₹4,902 crore from ₹4,286.6 crore in the same period last year.
- Total Income: The bank’s total income increased to ₹11,123 crore from ₹9,396 crore year-on-year.
- Net Profit: Although the net profit showed a 53% YoY decline, it grew 69% sequentially from the previous quarter (Q2FY25), where it stood at ₹201 crore.
Customer deposits increased 28.8% YoY, reaching ₹2,27,316 crore as of December 31, 2024. Similarly, loans and advances grew by 22% YoY, amounting to ₹2,31,074 crore.
Asset Quality Improves, but Provisions Surge
The bank showed improvement in its asset quality, with its gross non-performing assets (NPA) ratio declining to 1.94% from 2.04% in the same quarter last year. Its net NPA also decreased to 0.52% from 0.68%.
However, provisions for the quarter doubled to ₹1,338 crore from ₹655 crore a year ago. The gross slippage for the quarter stood at ₹2,192 crore, an increase of ₹162 crore from the previous quarter, largely due to issues in the microfinance segment.
Microfinance Business Challenges
The bank noted that most of the increase in slippages came from its microfinance business, contributing ₹143 crore out of the ₹162 crore slippage. Despite this, IDFC First Bank clarified that the majority of its loan book—comprising retail, MSME, agri, and corporate loans—remained stable.
The net interest margin (NIM) for the quarter was 6.04%, down slightly from 6.18% in Q2FY25, primarily due to the reduced share of the microfinance business in the total loan book.
Merger and Capital Adequacy
In October 2024, IDFC First Bank completed a merger with IDFC Ltd., adding ₹618 crore to its capital base. This boosted the Capital Adequacy Ratio to 15.65% for the December quarter, though it was down from 16.73% in the previous year.
CEO’s Statement
V. Vaidyanathan, Managing Director and CEO of IDFC First Bank, expressed confidence in the bank’s growth, noting that customer deposits and loans were on track, with steady growth in both areas. He also highlighted that the microfinance business issues were transitionary and were expected to be resolved in the next few quarters.
Excluding the microfinance segment, the bank’s gross NPA and net NPA were even lower at 1.81% and 0.49%, respectively.
Future Outlook
Despite the challenges in the microfinance sector, the bank is optimistic about its overall performance, backed by strong growth in its core businesses. The core operating profit (excluding trading gains) grew by 15% YoY, reaching ₹1,736 crore in Q3FY25.
Stock Performance
Shares of IDFC First Bank closed 1.32% lower at ₹62.27 on the BSE, with a market cap of ₹45,584.84 crore. Despite the drop in profit, analysts remain hopeful about the bank’s future growth prospects.