IDFC FIRST Bank delivered strong operational performance in FY25, supported by robust deposit growth, stable asset quality, and solid digital expansion. However, profitability took a hit due to elevated provisions in the microfinance segment. The bank’s strategic focus on building a resilient retail-led model continues to show positive results.
Strong Growth in Deposits and Loan Book
IDFC FIRST Bank’s customer deposits grew 25.2% year-on-year, reaching ₹2,42,543 crore as of March 31, 2025. Retail deposits surged 26.4% YoY to ₹1,91,268 crore, while CASA deposits grew by 24.8% YoY to ₹1,18,237 crore. The CASA ratio remained stable at a strong 46.9%.
On the lending side, the bank’s loan book expanded by 20.4% YoY, reaching ₹2,41,926 crore. The Retail, Rural, and MSME loan book saw 18.6% YoY growth. Focus areas like mortgage loans, vehicle loans, MSME finance, and corporate lending were key growth drivers. Meanwhile, the microfinance loan book reduced to just 4% of total assets, down from 6.6% last year, as part of the bank’s strategic de-risking efforts.
Asset Quality: Stable Despite Microfinance Pressure
The bank maintained robust asset quality metrics:
- Gross NPA (GNPA) stood at 1.87%, and Net NPA (NNPA) at 0.53%.
- Excluding the microfinance business, GNPA and NNPA improved to 1.63% and 0.47% respectively.
- Provision Coverage Ratio (PCR) strengthened to 72.3%.
Slippages outside of microfinance declined sequentially. However, stress remained in the microfinance book, with GNPA for that segment at 7.71%. Importantly, 66% of the microfinance loans are now covered under CGFMU insurance.
Profitability: Core Strength vs Microfinance Drag
While operational income remained strong:
- Net Interest Income (NII) grew by 17.3% to ₹19,292 crore.
- Core Operating Profit (excluding trading income) rose 17.2% YoY to ₹7,069 crore.
However, Net Profit declined sharply by 48.4% YoY, falling to ₹1,525 crore in FY25, compared to ₹2,957 crore in FY24. The key reason for this decline was higher provisions related to microfinance and a legacy infrastructure account.
The bank’s Net Interest Margin (NIM) moderated slightly to 5.95% from 6.04% in Q3 FY25.
Capital Position Strengthened
The bank’s Capital Adequacy Ratio (CAR) stood at 15.48%. To further bolster its capital base, the board approved a ₹7,500 crore capital raise via Compulsorily Convertible Preference Shares (CCPS) to investors including Warburg Pincus and ADIA’s private equity arm.
Post-conversion, CAR is expected to improve to 18.2%, ensuring strong headroom for future growth.
A dividend of ₹0.25 per share has also been announced, subject to shareholder approval.
Digital and Retail Banking: A Major Pillar
- IDFC FIRST Bank’s Mobile Banking App ranks among the Top-5 globally, with a rating of 4.9 on Google Play.
- The Private Wealth AUM crossed ₹42,000 crore, growing 27% YoY.
- The bank is the largest issuer and largest acquirer of FASTags in India.
- Credit cards in force crossed 3.5 million, with the card book growing 36% YoY.
Strong digital adoption also resulted in a 29% decline in customer calls despite a growing user base, reflecting improved operational efficiencies.
Risk Framework: Reinforced
- Early-stage delinquencies (SMA-1+2) excluding microfinance remain low and stable.
- First EMI bounce rates improved significantly to 4.6%, reflecting strong underwriting.
- Collection efficiency across retail and MSME segments (excluding microfinance) remained around 99.5%.
The risk framework has been upgraded further with better cash-flow based lending, advanced credit scorecards, and stringent underwriting norms.
Outlook
Going forward, IDFC FIRST Bank’s focus will remain on:
- Strengthening core profitability
- Scaling digital-led growth
- Prudent loan book diversification
- Reducing Cost-to-Income Ratio to ~65% by FY27
Despite near-term microfinance challenges, the bank’s strong franchise in retail deposits, digital capabilities, and upcoming capital infusion positions it well for sustainable, long-term growth.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Readers are advised to consult with their financial advisors before making any investment decisions. Paisonomics and the author are not responsible for any losses incurred as a result of information presented in this article.
