IDFC FIRST Bank Reports Sharp Profit Decline of 48.4% in Q4 FY25 Amidst Microfinance Headwinds

IDFC FIRST Bank, a prominent private sector lender, has released its audited financial results for the fourth quarter and full year ended 31 March 2025. Alongside the earnings, the bank's Board of Directors recommended a dividend of ₹0.25 per equity share of face value ₹10 each for the financial year 2024-25. 

The results reveal a year-on-year (YoY) contraction in net profit for the quarter, largely attributed to challenges within the microfinance sector, while key operational metrics like Net Interest Income (NII) and deposit growth demonstrated resilience. The Bank’s share is trading at ₹65.83, with a slight decline of -0.38%.

Financial Performance Highlights

For the fourth quarter of the financial year 2024-25 (Q4 FY25), IDFC FIRST Bank reported a net profit of ₹304 crore, a substantial decrease of 48.4% compared to ₹724 crore in Q4 FY24, on a YoY basis, settling at ₹1,525 crore, primarily impacted by issues in the microfinance industry.

The Net Interest Income (NII), which is the core revenue metric for banks, showed growth, increasing by 9.8% YoY, rising from ₹4,469 crore in Q4 FY24 to ₹4,907 crore in Q4 FY25. For the full year FY25, NII growth stood at 17.3 percent YoY. However, the Net Interest Margin (NIM) on Assets Under Management (AUM) saw a sequential decline, reducing by 9 basis points (bps) quarter-on-quarter (QoQ) from 6.04 percent in Q3 FY25 to 5.95 percent in Q4 FY25. This reduction was largely attributed to a decline in the microfinance business. For the full year FY25, the NIM was 6.09 per cent.

Other income streams contributed positively, with Fee and other income growing by 5.7 percent YoY to ₹1,702 crore in Q4 FY25. Core Operating income also increased by 8.7 percent, reaching ₹6,609 crore in Q4 FY25 from ₹6,079 crore in Q4 FY24. Despite this, the bank's core operating profit (excluding trading gain) saw a slight dip from ₹1,632 crore in Q4 FY24 to ₹1,618 crore in Q4 FY25. Excluding the microfinance business, the core operating profit demonstrated relatively stronger growth, up by 19.9 percent YoY in Q4 FY25 and 30.6 percent YoY in FY25.

Robust Deposit and Asset Growth

IDFC FIRST Bank demonstrated strong growth in customer deposits, which increased by 25.2 percent YoY to ₹2,42,543 crore as of 31 March 2025. Retail Deposits grew by 26.4 percent YoY to ₹1,91,268 crore, constituting 79 percent of total customer deposits. CASA (Current Account Savings Account) Deposits grew by 24.8 percent YoY to ₹1,18,237 crore. The CASA Ratio remained strong at 46.9 percent as of 31 March 2025, compared to 47.2 percent a year prior.

The bank's funded asset book grew by 20.4 percent, with loans and advances totalling ₹2,41,926 crore as of 31 March 2025. The Retail, Rural, and MSME book, a key focus area, grew by 18.6 percent YoY to ₹1,97,568 crore. In line with managing risk, the Microfinance portfolio reduced by 28.3 percent YoY, its proportion shrinking from 6.6 percent to 4.0 percent of the total loan book. The legacy infrastructure book also continued to reduce, constituting less than 1 percent of total funded assets.

Asset Quality and Provisions

The Gross Non-Performing Assets (GNPA) ratio improved by 7 basis points (bps) quarter-on-quarter (QoQ) to 1.87% in Q4 FY25, while the Net Non-Performing Assets (NNPA) ratio inched up by 1 bps to 0.53%. Excluding the microfinance segment, GNPA and NNPA ratios across Retail, Rural, and MSME portfolios remained stable or showed improvement. The Provision Coverage Ratio (PCR) stood strong at 72.3% as of 31 March 2025. Gross slippages for Q4 FY25 were ₹2,175 crore, marginally lower by ₹17 crore compared to the previous quarter. However, gross slippages in the microfinance book rose to ₹572 crore from ₹437 crore QoQ. Provisions for FY25 amounted to ₹5,515 crore, representing 2.46% of the loan book, primarily driven by higher slippages in microfinance.

Management Outlook and Capital Raise

IDFC FIRST Bank reported strong growth in customer deposits and stable asset quality, with a healthy expansion in its funded asset book. The bank announced commitments for an equity investment of approximately ₹7,500 crore from affiliates of Warburg Pincus LLC and a wholly owned subsidiary of the private equity division of Abu Dhabi Investment Authority (ADIA). The proposed capital raise, subject to regulatory approvals, aims to bolster the Capital Adequacy Ratio and support future growth initiatives.

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