Detailed narrative
Robust Loan Growth and Diversified Portfolio
IDFC First Bank demonstrated strong loan growth, with loans and advances, including credit substitutes, increasing by 20% year-on-year to reach ₹2.9 lakh crores. This growth was well-diversified across key segments, with mortgages, vehicle loans, consumer loans, wholesale loans, and business banking collectively accounting for approximately 87% of the total growth. The credit card portfolio also saw significant expansion, crossing 4.5 million cards and growing 22% YoY, while wealth management AUM increased by 23% to ₹57,000 crores.
Significant Asset Quality Improvement
The bank reported a notable improvement in asset quality, with the Gross NPA ratio declining by 8 basis points to 1.61% and the Net NPA ratio improving by 5 basis points to 0.48%. Gross slippages decreased by 15% QoQ, and net slippages fell by 27% QoQ. The MFI segment, a past area of concern, saw slippages reduce to ₹96 crores from ₹153 crores, and its collection efficiency improved to 99.7%. The overall credit cost for Q4 was 1.63%, a 42 basis point improvement from the previous quarter.
Profitability Impacted by One-offs, Strong Underlying Performance
Reported Profit After Tax (PAT) for Q4 FY26 stood at ₹319 crores. However, this included a post-tax impact of ₹480 crores from a one-off📎 fraud incident and a post-tax trading loss of ₹118 crores. Adjusting for these and a tax refund of ₹173 crores, the normalized PAT would have been approximately ₹746 crores. Net Interest Income (NII) grew by 15.7% YoY in Q4, and fee and other income grew strongly by 21.3%, indicating robust core operational performance.
Strengthening Deposit Franchise and Reduced Cost of Funds
Total deposits grew by 16.8% YoY to ₹2.94 lakh crores, with customer deposits reaching ₹284,000 crores, up 17% YoY. While Q4 saw a modest 1% sequential growth due to factors like SA rate reduction and the fraud incident, management expects strong traction in Q1 FY27. The CASA ratio remained strong at 49.8% (EOP) and 50.4% (average). Critically, the cost of funds reduced by over 50 basis points YoY to 6% in Q4, reflecting the bank's improving deposit franchise.
MFI Book Revival and Future Growth Outlook
The MFI book, which had seen declines in previous quarters, stabilized at ₹6,662 crores by March 2026, with 89% covered by CGFMU. MFI loan disbursements increased by 27% sequentially. Management expressed confidence that the MFI book would start contributing positively to overall growth and P&L, with an expectation to grow this segment by 15-20% in the next year. This segment is also strategically important for its contribution to PSL requirements and good yields.
Strategic Vision for Long-term ROA Improvement
Management articulated a long-term vision for ROA improvement, emphasizing the bank's unique specialization in high-yield lending (13%+ yield with ~2% credit cost, resulting in 11%+ risk-adjusted yield). While the deposit side is currently loss-making, it is expected to become profitable as it scales. The bank aims to bring down its liability cost-to-income ratio from 145% to 100% over the next few years, which will significantly boost overall profitability and ROA, eventually reaching 'kissing distance' of 1% and beyond.
Capital Adequacy and Future Capital Needs
The bank maintained a healthy Capital Adequacy Ratio of 15.60% and a CET-1 ratio of 13.73% after considering the proposed dividend. Management indicated that with the anticipated growth trajectory, the bank would require more capital by the end of the next financial year (FY27) and plans to undertake a capital raise. This proactive approach ensures sufficient capital to support future expansion and maintain strong regulatory ratios.