IDFC First Bank reported a 32% decline in net profit to Rs 463 crore for the quarter ended June due to rise in provisions against microfinance books. While the bank’s provisions rose 67% to Rs 1,659 crore in the June quarter from Rs 994 crore in the corresponding period of the previous year.
V Vaidyanathan, MD & CEO, IDFC Bank, said, “On asset quality, all our businesses, other than microfinance continue to perform well…by H2 FY26, MFI issue should largely be behind us. Our customer franchise is strong. So all-in-all we are well positioned for the future.”
Deposit growth robust
The bank posted a total income of Rs 11,869 crore, up 14% on year. The ‘other income’ has seen a significant rise of 37% during the quarter to Rs 2,227 crore.
Due to higher provisions, the gross non-performing asset ratio (NPA) rose to 1.97% from 1.87% in the previous quarter and net NPA rose to 0.55% from 0.53%.
MFI exposure
Primarily due to seasonality, the bank’s credit cost rose to 2% in Q1FY26, excluding microfinance and one legacy infrastructure toll account.
The bank grew its deposits 25.5% on year to Rs 2.57 lakh crore as of June 30, whereas, the loan book was up 21.0% y-o-y to Rs 2.53 lakh crore. The loan growth is mainly driven by mortgage loans, vehicle loans, business banking, MSME loans and wholesale loans, which contributed 82% of the overall growth, the bank said.
Owing to higher slippages, the bank reduced its microfinance book by 37% y-o-y to Rs 8,354 crore, which constitutes 3.3% of the overall loan book compared to 6.3% a year ago.
The lender’s net interest income — the difference between interest earned and expenses — grew 5% y-o-y Rs 4,933 crore during the quarter under review. The net interest margin (NIM) reduced by 24 bps on quarter to 5.71% from 5.95% in the previous quarter. “Our margins reduced because we passed on the benefit of repo rate to eligible borrowers and asset mix change, but term deposits broadly would take a year to reprice downwards,” Vaidyanathan added.
During the quarter, the bank announced a fresh equity capital raise of Rs 7,500 crore and it is likely to be completed in Q2FY26, it said.