IDFC First Bank Q2 Results: Profit Nearly Triples to ₹1,045 Crore

IDFC First Bank’s standalone net profit nearly tripled to ₹1,045 crore in the July–September quarter from ₹352 crore a year ago, as provisions fell and core income grew.

The IDFC First Bank Q2 results, approved by the board on Saturday, October 24, showed profit up 196.5% year-on-year. On a sequential basis, profit eased 2.8% from ₹1,075 crore in the April–June quarter, the bank said in its Q2 FY27 investor presentation.

Key numbers from IDFC First Bank Q2 results

Net interest income rose 21% to ₹6,184 crore from ₹5,113 crore a year earlier. Net interest margin stood at 5.58%, against 5.90% in the previous quarter on a basis that excludes interest on an income tax refund.

Core operating income, which leaves out trading gains, grew 21.9% to ₹8,469 crore. Operating expenses rose a slower 16% to ₹5,942 crore, bringing the core cost-to-income ratio down to 70.2% from 73.7% a year ago.

Provisions fell 21.7% to ₹1,137 crore from ₹1,452 crore. Core operating profit climbed 38.5% to ₹2,527 crore, while return on assets improved to 0.93% from 0.38% in the year-ago quarter.

Asset quality also got better. Gross NPA eased to 1.32% from 1.86% a year earlier and 1.51% at the end of June, while net NPA fell to 0.40% from 0.52%.

Deposits jump on FCNR(B) inflows

Total deposits rose 25.9% year-on-year and 11.8% sequentially to ₹3,48,583 crore. A large part of the quarterly jump came from foreign currency non-resident (FCNR-B) deposits, of which the bank mobilised ₹34,390 crore, or about $3.6 billion.

These inflows pulled the period-end CASA ratio down to 47.6% from 50.1% a year ago. Excluding FCNR(B) deposits, the ratio stood at 52.8%, according to the presentation.

Loans and advances, including credit substitutes, grew 30.1% to ₹3,46,913 crore. Stripping out loans backed by FCNR(B) deposits, growth was 22.2%. The bank set aside ₹100 crore as a standard asset provision on these FCNR(B)-backed loans.

MD and CEO V. Vaidyanathan said operating expense growth had trailed income growth by about 500 basis points for a second straight quarter. He added that return on assets was now “within touching distance of 1%”.

He also called the FCNR(B) mobilisation a significant positive for the bank. According to media reports of management commentary, these deposits provide three-to-five-year liquidity at a cost about one percentage point below domestic deposits.

Why the IDFC First Bank net profit jump matters

This is the second straight quarter in which the private lender’s profit has crossed ₹1,000 crore. For a bank that earned ₹352 crore in the same quarter last year, the turnaround points to better operating leverage and lower credit costs.

IDFC First Bank was formed through the merger of IDFC Bank and Capital First in December 2018, with Vaidyanathan at the helm. Retail deposits now form 82% of customer deposits, up from 27% at the time of the merger, and the lender had 1,200 branches as of September 30.

Capital buffers, however, have thinned as the loan book expanded. Capital adequacy stood at 14.67% at the end of September, against 15.05% in June and 16.82% a year earlier. The CET1 ratio slipped to 13% from 14.75%.

The bank also received a maiden long-term investment-grade rating of ‘BBB-’ from S&P Global, according to its results disclosure. Larger rivals have posted strong numbers this season as well, with ICICI Bank’s Q2 profit rising 20% on 30% loan growth.

What to watch next

Investors will track whether margins stabilise after the 32-basis-point sequential dip, and whether return on assets can cross 1% in the coming quarters. The pace of capital consumption will also be in focus, given loan growth of about 30%.

Monday’s session is the first chance for the stock to react to the IDFC First Bank Q2 results, which were announced on Saturday. More results coverage is available in our Business News section.