IDFC First Bank Q1 Results: Net Profit Drops 32% YoY To Rs. 463 Cr Despite 52% Sequential Growth; NII Grows 5%

On Saturday, July 26, IDFC First Bank released its financial results for the quarter that ended on June 30, 2025. Despite growing 52% sequentially, IDFC FIRST Bank's Q1 FY26 net profit of Rs 463 crore represented a 32% year-on-year decline. Higher provisions, which increased to Rs 1,659 crore as a result of slippages in the microfinance portfolio, and a decline in net interest margins (NIM) of 24 basis points on a quarterly basis to 5.71% were the main causes of the decline in profit. The bank pinned lower investment yields, changes in the asset mix, including a significant reduction in microfinance exposure, and repo rate transmission to borrowers for this compression of margins.

The operational side saw a 13.4% growth in total operating income, with Net Interest Income (NII) growing 5.1% YoY to Rs 4,933 crore and fee and other income rising 8.5% YoY to Rs 1,731 crore. The bottom line was further impacted by operating expenses, which increased 11% year on year to Rs 4,921 crore. As a result, operating profit (not including trading gains) increased 7.8% sequentially but was down 6.2% YoY to Rs 1,744 crore. Despite the bank's core income streams continuing to grow, credit costs and margin compression generally hurt profitability.

Mr. V Vaidyanathan, Managing Director and CEO, IDFC FIRST Bank, said, "We are pleased to share that our core franchise continues to grow well. In banking, Capital is the foundation and Deposits are the raw material for our business. With the impending equity raise, our capital adequacy will be at 17.6% (if computed at June 30, 2025). With customer deposits growing at 25.5%, our funding is strong. Our incremental Credit Deposit Ratio for the last 1 year is only 75.8%. On Asset Quality, all our businesses, other than microfinance continue to perform well, GNPA and NNPA are at 1.97% and 0.55%, respectively."

"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. So, by H2 FY26 margins is likely to be better. Also, by H2 FY26, MFI issue should largely be behind us. Our customer franchise is strong. So all-in-all we are well positioned well for the future," Mr. V Vaidyanathan further added.

IDFC FIRST Bank had robust growth in both deposits and borrowings in the first quarter of FY26. Retail deposits increased 24.5% YoY to Rs 2,04,222 crore, while customer deposits climbed 25.5% YoY to Rs 2,56,799 crore. Retail deposits accounted for 80% of total deposits, while CASA deposits saw strong growth of 30.2% YoY to reach Rs 1,27,158 crore, raising the CASA ratio to 48%.

Regarding its other businesses, the bank's credit card portfolio rose to 3.8 million cards, its private wealth management AUM climbed 34% year on year and surpassed the Rs 50,000 crore mark, and it maintained its position as the market leader in the FASTag category with 19.1 million active tags. Loans and advances increased 21% YoY to Rs 2,53,233 crore, with mortgages, vehicle loans, business banking, MSME loans, and wholesale banking accounting for 82% of the YoY growth. The wholesale book increased 38.6% YoY to Rs 49,279 crore, while the retail, rural, and MSME book grew 17.4% YoY to Rs 2,03,954 crore.

Notably, the bank lowered its exposure to microfinance by 36.9% year on year, lowering its overall loan book share from 6.3% to 3.3%.

With the gross non-performing assets (GNPA) at 1.97% as of June 30, 2025, up from 1.87% in the previous quarter, and the net non-performing assets (NNPA) at 0.55% as opposed to 0.53% in Q4 FY25, IDFC FIRST Bank was able to maintain a generally stable asset quality in Q1 FY26. GNPA went up slightly to 1.82% in the retail, rural, and MSME book, although this book held steady at 1.48% gross non-performing assets and 0.60% net non-performing assets (NPA) excluding microfinance. At 72.3%, the bank's Provision Coverage Ratio (PCR) stayed strong, demonstrating its watchful provisioning approach.

The quarter's provisions climbed to Rs 1,659 crore, mostly as a result of microfinance slippages.

IDFC First Bank Target Price

"IDFC First Bank is underperforming, with the price hovering near crucial support at ₹70. A breakdown below this level could drag it further to ₹66-₹67. The structure shows distribution, and momentum indicators are turning bearish. Resistance lies at ₹74, and only a close above that would negate the current weakness. Until then, the stock is likely to trade with a negative bias. Caution is advised for fresh entries," commented Riyank Arora, technical analyst at Mehta Equities.

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