IDFC FIRST Bank Reports 76% YoY Profit Growth in Q2, Eyes Margin Improvement

IDFC First Bank has reported a robust 76% year-on-year growth in profit after tax for Q2, with net profit reaching INR 352.00 crores. This significant increase was primarily driven by core income growth and reduced provisioning. The bank's performance showcases its resilience and strategic focus on key areas of business.

Key Financial Highlights

Metric	Q2	YoY Change
Profit After Tax	INR 352.00 crores	+76%
Total Customer Deposits	INR 2.69 lakh crores	+23.4%
Loans and Advances	INR 2.67 lakh crores	+19.7%
Gross NPA	1.86%	Improved from 1.97% QoQ
Net NPA	0.52%	Improved from 0.55% QoQ

Deposit and Loan Growth

IDFC FIRST Bank witnessed substantial growth in its deposit base, with total customer deposits increasing by 23.4% year-on-year to INR 2.69 lakh crores. The bank's CASA (Current Account Savings Account) ratio stood at 50.1%, indicating a strong and stable funding source.

On the lending front, loans and advances grew by 19.7% year-on-year, reaching INR 2.67 lakh crores. This growth was broad-based across various segments, including mortgages, vehicle loans, and consumer loans.

Asset Quality Improvement

The bank's asset quality showed notable improvement, with gross Non-Performing Assets (NPA) reducing to 1.86% from 1.97% in the previous quarter. Net NPA also improved to 0.52%, down from 0.55% in the last quarter. This improvement in asset quality reflects the bank's prudent risk management practices and the overall stabilization of the loan portfolio.

Margin Pressure and Future Outlook

While the bank reported strong growth in various segments, it faced some pressure on margins. The Net Interest Margin (NIM) declined by 12 basis points sequentially to 5.59%. This decrease was attributed to changes in the repo rate and shifts in the asset mix, including a decline in the microfinance business from INR 8,300.00 crores to INR 7,300.00 crores.

However, the management expressed optimism about margin improvement in the coming quarters. They expect margins to improve in Q3 and Q4, targeting levels above 5.8% by Q4. This expectation is based on the anticipated stabilization of the interest rate environment and the bank's strategic initiatives.

Credit Card Business Expansion

A notable highlight of the quarter was the significant growth in the bank's credit card business. IDFC FIRST Bank crossed the milestone of 4 million credit card issuances, with the credit card book reaching INR 8,600.00 crores. This rapid expansion in the credit card segment demonstrates the bank's ability to capture market share in high-yield consumer finance products.

Branch Network and Capital Adequacy

The bank continued to expand its physical presence, opening 25 new branches during the quarter. This expansion brought the total branch count to 1,041, enhancing the bank's reach and customer service capabilities.

IDFC FIRST Bank maintained a strong capital position, with a capital adequacy ratio of 14.34%. This robust capital base provides the bank with ample room for future growth and expansion.

Management Commentary

V. Vaidyanathan, Managing Director and CEO of IDFC FIRST Bank, commented on the results, stating, "We are pleased with our performance this quarter, which reflects the strength of our diversified business model and our focus on sustainable growth. While we faced some margin pressure, we are confident about margin improvement in the coming quarters. Our strong deposit growth and improving asset quality position us well for future opportunities."

The bank's management indicated that the challenges in the microfinance sector are largely resolved, and they expect this segment to stabilize by the end of the fiscal year.

As IDFC FIRST Bank continues to navigate the evolving banking landscape, its focus on retail banking, digital initiatives, and prudent risk management is likely to drive its growth trajectory in the coming quarters.

1 Day	5 Days	1 Month	6 Months	1 Year	5 Years
+2.85%	+9.99%	+11.98%	+15.35%	+18.59%	+151.07%

IDFC First Bank has reported a significant increase in its standalone net profit for the second quarter, driving its share price up by 3.3%. The bank's financial performance and market response highlight its growing strength in the Indian banking sector.

Financial Performance Highlights

Metric	Q2 FY26	Y-o-Y Change
Net Profit	₹352.31 crore	+75.5%
Net Interest Income	₹5,112.57 crore	+6.8%
Total Customer Business	₹5,35,673 crore	+21.6%
Loan Growth	-	+19.7%
Deposit Growth	-	+23.4%

IDFC First Bank's standalone net profit for Q2 surged to ₹352.31 crore, marking a substantial 75.5% increase from ₹200.69 crore in the same quarter of the previous year. The bank's net interest income also saw growth, rising by 6.8% to ₹5,112.57 crore. However, it's worth noting that the net interest margin experienced a decline of 59 basis points, settling at 5.59%.

Business Growth and Asset Quality

The bank demonstrated robust growth in its total customer business, which expanded by 21.6% to reach ₹5,35,673 crore. This growth was driven by a 19.7% increase in loans and a 23.4% rise in deposits.

IDFC First Bank maintained stable asset quality metrics:

Gross Non-Performing Assets (NPA): 1.86%
Net Non-Performing Assets (NPA): 0.52%

Deposit Mix Improvement

A notable improvement was seen in the bank's CASA (Current Account Savings Account) deposits, which grew by 26.8%. This growth led to an enhancement in the CASA ratio, which improved to 50.07%, indicating a healthier deposit mix.

Management Commentary

V Vaidyanathan, MD and CEO of IDFC First Bank, provided insights on the bank's performance. He noted that the stress in the Microfinance (MFI) business appears to have been resolved, and the bank is experiencing improving operating leverage.

Market Response and Analyst Outlook

The market responded positively to IDFC First Bank's financial results, with the bank's shares rallying 3.3% to ₹74.27.

Motilal Oswal, a prominent financial services firm, maintained a 'Neutral' rating on IDFC First Bank with a target price of ₹280. The firm projects a 20% loan growth CAGR (Compound Annual Growth Rate) for the bank over FY25-28.

Investor Communication

In line with regulatory requirements, IDFC First Bank has made the audio recording of its earnings call with analysts and investors available on its website. The call discussed the unaudited financial results for the quarter and half-year ended September 30.

IDFC First Bank's strong Q2 performance, characterized by significant profit growth and robust business expansion, reflects its strengthening position in the Indian banking landscape. The bank's focus on deposit growth, particularly in CASA, along with maintained asset quality, suggests a balanced approach to growth and risk management. As the bank continues to navigate the evolving financial sector, investors and analysts will be keenly watching its strategies for sustained growth and profitability.