IDFC FIRST Bank Reports 48.4% Profit Drop in Q4 FY25

IDFC FIRST Bank, a leading private sector lender, has shared its audited financial results for the fourth quarter and the full year ending March 31, 2025. Along with the financial results, the bank’s Board of Directors has recommended a dividend of ₹0.25 per equity share (face value ₹10 each) for the financial year 2024-25.

Profit Decline Driven by Microfinance Sector

The results show a year-on-year (YoY) drop in net profit for the quarter, primarily due to challenges faced by the microfinance sector. Despite these difficulties, the bank showed strength in operational metrics such as Net Interest Income (NII) and deposit growth. The bank’s stock is trading at ₹65.83, reflecting a slight decline of 0.38%.

In Q4 FY25, IDFC FIRST Bank reported a net profit of ₹304 crore, a significant decrease of 48.4% from ₹724 crore in the same quarter last year. For the full year, the net profit dropped to ₹1,525 crore, mainly impacted by ongoing issues in the microfinance business.

Key Financial Metrics

One of the bank’s core revenue drivers, Net Interest Income (NII), showed growth, increasing by 9.8% YoY. It rose from ₹4,469 crore in Q4 FY24 to ₹4,907 crore in Q4 FY25. For the entire FY25, NII grew by 17.3%. However, the Net Interest Margin (NIM) saw a slight drop of 9 basis points (bps) QoQ, from 6.04% in Q3 FY25 to 5.95% in Q4 FY25. This decline is mainly attributed to the microfinance business.

On a positive note, the bank’s fee and other income grew by 5.7% YoY, reaching ₹1,702 crore in Q4 FY25. Additionally, core operating income saw an increase of 8.7%, reaching ₹6,609 crore compared to ₹6,079 crore in Q4 FY24. However, core operating profit (excluding trading gains) slightly declined from ₹1,632 crore in Q4 FY24 to ₹1,618 crore in Q4 FY25. Excluding the microfinance business, the core operating profit showed stronger growth, up by 19.9% YoY in Q4 FY25.

Strong Deposit Growth and Asset Quality

IDFC FIRST Bank reported a 25.2% YoY increase in customer deposits, reaching ₹2,42,543 crore by March 31, 2025. Retail deposits grew by 26.4%, totaling ₹1,91,268 crore, making up 79% of total customer deposits. The bank’s CASA (Current Account Savings Account) deposits grew by 24.8% YoY to ₹1,18,237 crore. The CASA ratio remained robust at 46.9% as of March 31, 2025, compared to 47.2% a year earlier.

The bank’s funded asset book grew by 20.4%, with loans and advances totaling ₹2,41,926 crore as of March 31, 2025. The Retail, Rural, and MSME loan book, which remains a key focus area, grew by 18.6% YoY to ₹1,97,568 crore. The microfinance portfolio, however, reduced by 28.3%, shrinking from 6.6% to 4.0% of the total loan book. Additionally, the legacy infrastructure book continued to decrease, now making up less than 1% of total funded assets.

Improving Asset Quality

The bank’s Gross Non-Performing Assets (GNPA) ratio improved by 7 bps QoQ to 1.87% in Q4 FY25. However, the Net Non-Performing Assets (NNPA) ratio saw a slight increase of 1 bps, reaching 0.53%. Excluding microfinance, GNPA and NNPA ratios in the Retail, Rural, and MSME portfolios remained stable or improved. The Provision Coverage Ratio (PCR) stood strong at 72.3% as of March 31, 2025.

Despite this, the bank reported gross slippages of ₹2,175 crore for Q4 FY25, which was slightly lower than the previous quarter. Slippages in the microfinance segment increased to ₹572 crore from ₹437 crore QoQ. Provisions for FY25 amounted to ₹5,515 crore, representing 2.46% of the loan book, mainly due to higher slippages in microfinance.

Strategic Investment and Future Growth

IDFC FIRST Bank also announced a commitment for an equity investment of ₹7,500 crore from affiliates of Warburg Pincus LLC and a subsidiary of the Abu Dhabi Investment Authority (ADIA). This proposed capital raise, subject to regulatory approvals, is aimed at strengthening the bank’s Capital Adequacy Ratio and supporting its future growth initiatives.

Conclusion

while IDFC FIRST Bank faced a challenging quarter due to the microfinance sector’s performance, it demonstrated resilience in its core operations, deposit growth, and asset quality. With strategic investments planned for the future, the bank is well-positioned to manage its growth and risk.