IDFC First Bank

IDFC First Bank demonstrated robust growth in its deposit franchise, with customer deposits crossing the ₹2.5 lakh crore milestone to reach ₹2.57 lakh crores, marking a 26% YoY increase. Retail deposits also surpassed ₹2 lakh crores. The CASA ratio improved sequentially to 48% at June 2025, and the combined retail term deposits and CASA now constitute 85% of total customer deposits. The bank's cost of funds declined by 9 bps to 6.42%, and cost of deposits marginally decreased by 1 bps to 6.37%, reflecting the strength of its deposit-gathering capabilities and strategic rate management.

The bank's funded assets grew by a strong 21% YoY to ₹2.53 lakh crores, with a sequential growth of 4.7%. This growth was primarily driven by segments such as mortgage, vehicles, business banking, working capital loans, and the wholesale book. The wholesale book grew at a faster pace of 39% YoY. The bank continues to scale up products like credit cards, with 3.8 million cards issued and spends growing 35% YoY. However, the microfinance business experienced a 37% YoY degrowth, bringing its book size to ₹8,354 crores, representing 3.3% of funded assets.

Gross NPA for the bank increased marginally from 1.87% in March to 1.97% in June, with Net NPA rising from 0.53% to 0.55%. Excluding the microfinance book, GNPA stood at 1.70%. The MFI SMA pool significantly declined from 5.1% to 2.64% in June, with absolute MFI SMA pool at ₹315 crores, a 59% reduction from its December peak. MFI collection efficiency improved to 99.0% from 98.1% in the previous quarter. Gross slippages increased sequentially to ₹2,486 crores, including a ₹108 crore corporate case, which has been 100% provisioned. The bank maintains a healthy provision coverage ratio of 72.3%.

Net Interest Income (NII) grew 5.1% YoY to ₹4,933 crores, or 11.8% YoY excluding the microfinance business. The Net Interest Margin (NIM) on AUM moderated by 24 bps to 5.71%. This moderation is attributed to the pass-through of repo rate cuts, the decline in the microfinance business, and moderation in investment yields, partially offset by a lower cost of funds. Management expects NIM to restore to Q4 FY25 levels (around 5.8%) by Q4 FY26, as the benefits of reduced deposit rates fully materialize.

Operating expenses growth moderated to 11% YoY and declined 1.4% sequentially, reflecting effective cost management. The bank reported a Profit After Tax of ₹463 crores, a 52% sequential increase, though a 32% YoY decrease primarily due to the microfinance impact and higher provisions. Capital adequacy, including Q1 profits, stood at 15.01% with a CET 1 ratio of 12.80%. The bank expects to conclude a ₹7,500 crore capital raise in Q2 FY26, which will significantly boost its CRAR to 17.6% and Tier 1 ratio to 15.38%, providing a strong foundation for future growth.

Management emphasized a long-term vision focused on building a universal bank with strong fundamentals. They highlighted the journey of the retail book from ₹0 in 2010 to ₹2 lakh crores by June 2025. The bank aims to bring its credit-to-deposit ratio down to 80-90% by year-end or next year. They reiterated a credit cost guidance of 2-2.05% for FY26 and a target cost-to-income ratio of 65% by FY27, indicating a commitment to sustainable and profitable growth through disciplined execution and strong governance.