IDFC First Bank Q4 Results: Net Profit Drops 58% YoY Amid Microfinance Slowdown

IDFC First Bank reported a 58 per cent year-on-year (YoY) decline in standalone net profit for the fourth quarter of FY25, with net earnings falling to Rs 304 crore from Rs 724 crore in the same quarter last year, the bank said on Saturday.

Despite the profit slump, the bank saw healthy growth in core income. Net Interest Income (NII) rose 9.8 per cent YoY to Rs 4,907 crore in Q4 FY25, compared to Rs 4,469 crore in Q4 FY24. However, this was offset by a 20 per cent increase in interest expenses, which rose to Rs 4,506 crore from Rs 3,750 crore a year earlier. The Net Interest Margin (NIM) on Assets Under Management (AUM) narrowed sequentially by 9 basis points (bps), dropping to 5.95 per cent in Q4 from 6.04 per cent in Q3. For the full year, NIM stood at 6.09 per cent.

The bank’s deposit base showed robust growth, with total customer deposits increasing 25.2 per cent YoY to Rs 2,42,543 crore as of March 31, 2025. Retail deposits rose 26.4 per cent to Rs 1,91,268 crore, and CASA (current account savings account) deposits expanded by 24.8 per cent to Rs 1,18,237 crore. The CASA ratio remained stable at 46.9 per cent.

Loans and advances also recorded a healthy rise of 20.4 per cent YoY, reaching Rs 2,41,926 crore. The retail, rural, and MSME segment grew by 18.6 per cent YoY. In contrast, the microfinance portfolio contracted 28.3 per cent, reducing its contribution to the total loan book from 6.6 per cent to 4 per cent.

Gross NPA

The asset quality remained broadly stable outside the microfinance segment. Gross NPA improved slightly to 1.87 per cent in Q4 from 1.94 per cent in Q3, while Net NPA increased marginally to 0.53 per cent. Excluding the MFI segment, gross and net NPAs in the retail, rural, and MSME segments stood at 1.40 per cent and 0.56 per cent, respectively.

Gross slippages for the quarter came in at Rs 2,175 crore, marginally lower than Rs 2,192 crore in the previous quarter. However, slippages in the microfinance segment rose to Rs 572 crore from Rs 437 crore, reflecting stress in that vertical. Excluding microfinance, slippages improved to Rs 1,603 crore from Rs 1,755 crore.

The bank’s Provision Coverage Ratio (PCR) remained strong at 72.3 per cent, and management said it is monitoring the microfinance business closely amid industry-wide delinquencies. The lender’s legacy infrastructure book now accounts for less than 1 per cent of its funded assets, having declined 17 per cent YoY to Rs 2,348 crore.

Despite the setback in microfinance, IDFC First Bank remains optimistic, supported by steady growth in retail lending, rising deposits, and strong asset quality outside the stressed segment.

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Leadership Take

“Our customer deposits grew well at 25 per cent YoY and the CASA ratio continues to remain strong at 46.9 per cent, reflecting the strength of our deposit franchise. Our funded asset book grew by 20.4 per cent. Importantly, the Bank's asset quality remains resilient, with GNPA and NNPA at 1.87 per cent and 0.53 per cent respectively," Managing Director and CEO V Vaidyanathan said.

"Further, an affiliate entity of Warburg Pincus LLC and a wholly owned subsidiary of private equity division of Abu Dhabi Investment Authority (ADIA), have committed to invest ~Rs. 7,500 Cr in the Bank (subject to necessary regulatory and shareholders’ approvals), which will further strengthen our Capital Adequacy Ratio and support our next phase of growth," Vaidyanathan added.

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