IDFC First Bank Limited

IDFC First Bank commenced operations 7 years ago, on December 31, 2018, with a total of INR 1.18 lakh crores in deposits and borrowings, of which only INR 10,400 crores were retail deposits. The bank's immediate priority was to rapidly build its deposit franchise, which involved offering competitive rates like 7% on savings accounts. This strategy successfully reduced the cost of funds from 7.8% in March 2019 to 6.11% currently, aligning it closely with mid-tier banks at 6.09%.

The bank has significantly strengthened its deposit base, raising over INR 2 lakh crores to settle upcoming maturities. Total deposits grew 22.9% year-on-year to INR 2.9 lakh crores, with customer deposits reaching INR 2.83 lakh crores, a 24.3% year-on-year increase. CASA deposits surged 33% year-on-year to INR 1.5 lakh crores, resulting in an end-of-period CASA ratio of 51.6% and an average CASA ratio of 50% for the quarter. The cost of deposits and cost of funds both saw reductions of 15 and 12 basis points, respectively, during the quarter.

Loans and advances expanded by 21% year-on-year to INR 2.8 lakh crores, driven by strong performance across mortgages, vehicle loans, consumer loans, MSME loans, and wholesale loans. The microfinance (MFI) book stands at INR 6,657 crores, constituting 2.4% of the total funded book, with an observed pickup in disbursements. The credit card portfolio reached 4.3 million cards, with a book size of INR 9,100 crores, and credit card spends for the 9-month period increased by 35% year-on-year.

Asset quality demonstrated a positive trend, with Gross NPA improving by 17 basis points to 1.69% from 1.86% in Q2. Net NPA remained stable at 0.53%. Gross slippages declined by approximately 7%, and net slippages improved by about 9% sequentially. The microfinance portfolio's SMA (Special Mention Account) reduced by 27 basis points, and its pool decreased by 33% sequentially, indicating that the challenges in this segment are largely being addressed.

Profit After Tax (PAT) for the quarter reached INR 503 crores, marking a 43% sequential growth and 48% year-on-year growth. Net Interest Income (NII) grew 12% year-on-year, and the Net Interest Margin (NIM) on an AUM basis improved by 17 basis points to 5.76%. The bank utilized INR 75 crores from its microfinance provision buffer and carries forward INR 165 crores as a contingency provision. While operating expenses grew 13.4% year-on-year, management anticipates significant improvements in cost-to-income ratios across segments as the bank achieves greater scale.

The bank's Capital Adequacy Ratio (CAR) stood at 16.22%, with the CET1 ratio at 14.23%. These ratios reflect the conversion of INR 7,500 crores of Compulsorily Convertible Preference Shares (CCPS) into equity during the quarter. The average Liquidity Coverage Ratio (LCR) was maintained at a healthy 115%, with retail deposits contributing 64.7% to the LCR, demonstrating a robust liquidity position.

Management reiterated its long-term strategy to evolve into a more mature institution by gradually shifting towards safer segments, including a higher proportion of mortgages, business loans, and gold loans. The bank aims to achieve an ROA of approximately 1.6% with scale. This strategy is underpinned by leveraging its technology-driven lending capabilities to profitably serve underserved segments while continuously improving operational efficiency and reducing cost-to-income ratios across its business lines.