IDFC First Bank on Saturday posted a 73% year-on-year fall in net profit at Rs 201 crore in the September quarter, impacted by a sharp rise in provisions.
With a decline in net profit, the bank fell short of Bloomberg’s projected estimate of Rs 670 crore.
During the July-September quarter, provisions of the bank rose 228% to Rs 1,732 crore against Rs 528 crore a year ago.
Healthy growth in the bank’s loan book and largely stable asset quality aided the lender’s performance. Consequently, the net interest income rose 21% to Rs 4,788 crore in the quarter ended September from Rs 3,950 crore in the year-ago period.
Our core drivers are strong. Our brand technology and high service levels are enabling strong growth in deposits, V Vaidyanathan, managing director and CEO, IDFC First Bank, said in a statement.
The ability to grow deposits is a key strategic strength of the bank. We are confident to revive our profitability going forward, he said.
Advances increased by 22% year-on-year to Rs 2.22 lakh crore, driven by growth in retail loans, which grew 25%, and growth in loans to corporates, which grew by 20%.
The bank’s legacy infrastructure book fell by 21%. The total loan book increased by 21.5%.
The bank made provisions of Rs 568 crore, including Rs 315 crore in the microfinance institution business, which has been experiencing stress. In the reported quarter, the microfinance portfolio, as a percentage of an overall loan book, reduced to 5.6% from 6.3% sequentially. Excluding the provisions, the credit cost for the loan book was at 1.8%. The bank’s capital adequacy ratio was strong at 16.36%, with a CET-I ratio of 13.84%.
Deposits grew by 32.4% to Rs 2.18 lakh crore, driven by a 37% growth in retail deposits, which reached Rs 1.75 lakh crore. The current account and savings account (CASA) ratio of the bank was 48.9% at the end of September.
Excluding legacy borrowings, the cost of funds was 6.37% in Q2 FY25, while the cost of deposits was at 6.38%.
On the asset quality side, the gross non-performing asset (NPA) ratio was a tad up by 2 basis points on a quarter-on-quarter basis to 1.92%, while the net NPA improved by 11 basis points to 0.48%.
IDFC First Bank reported a marginal reduction of 4 basis points in its net asset under management (AUM), bringing it to 6.18% for the quarter ended September.
The bank achieved a steady 21% growth in operating income while operating expenses rose at a slowing pace of 18%.
Core operating profit, excluding treasury gains, rose by 28%, and overall operating profit rose by 30%.
The collection efficiency for the urban retail book remained stable at 99.5%, while the microfinance book’s collection efficiency deteriorated by 40 basis points to 98.6%.
In July, the bank raised fresh equity capital of Rs 3,200 crore with domestic institutional investors. Additionally, the bank completed its IDFC merger in October, enhancing its net worth by Rs 618 crore while reducing the outstanding shares by as much as 16.64 crore shares.