IDFC First Bank reported a significant decline in its net profit for the fourth quarter of the financial year 2024-25, with a staggering 58% drop year-on-year (YoY). The bank's net earnings fell to Rs 304 crore from Rs 724 crore in the same quarter last year, as announced on Saturday, April 26, 2025. Despite this slump in profitability, the bank has shown robust growth in its core income, particularly in its Net Interest Income (NII), which rose by 9.8% YoY to Rs 4,907 crore in Q4 FY25, up from Rs 4,469 crore in Q4 FY24. However, this growth was overshadowed by a 20% increase in interest expenses, which climbed to Rs 4,506 crore from Rs 3,750 crore a year earlier.
The Net Interest Margin (NIM) on Assets Under Management (AUM) narrowed by 9 basis points, dropping to 5.95% in Q4 from 6.04% in Q3. For the entire year, the NIM stood at 6.09%. On a positive note, the bank's total customer deposits surged by 25.2% YoY to Rs 2,42,543 crore as of March 31, 2025. Retail deposits also saw a healthy increase of 26.4%, reaching Rs 1,91,268 crore, while CASA (current account savings account) deposits expanded by 24.8% to Rs 1,18,237 crore, maintaining a stable CASA ratio of 46.9%.
Loans and advances recorded a solid rise of 20.4% YoY, reaching Rs 2,41,926 crore. The retail, rural, and MSME segments grew by 18.6% YoY. However, the microfinance portfolio faced a sharp contraction of 28.3%, reducing its contribution to the total loan book from 6.6% to 4%. This decline reflects broader stress in the microfinance sector, which the bank is monitoring closely. The bank's asset quality remained broadly stable outside the microfinance segment, with Gross Non-Performing Assets (NPA) improving slightly to 1.87% in Q4 from 1.94% in Q3, while Net NPA increased marginally to 0.53%.
Gross slippages for the quarter totaled Rs 2,175 crore, slightly down from Rs 2,192 crore in the previous quarter. Notably, slippages in the microfinance segment rose to Rs 572 crore from Rs 437 crore, indicating increasing stress in that area. Excluding microfinance, slippages improved to Rs 1,603 crore from Rs 1,755 crore. The bank's Provision Coverage Ratio (PCR) remained robust at 72.3%, which reflects its commitment to managing potential losses. The bank's legacy infrastructure book now constitutes less than 1% of its funded assets, having declined 17% YoY to Rs 2,348 crore.
Despite the setbacks in the microfinance sector, IDFC First Bank remains optimistic about its future, buoyed by steady growth in retail lending, rising deposits, and strong asset quality in other segments. V Vaidyanathan, the Managing Director and CEO, stated, "Our customer deposits grew well at 25% YoY, and the CASA ratio continues to remain strong at 46.9%, reflecting the strength of our deposit franchise. Our funded asset book grew by 20.4%. Importantly, the Bank's asset quality remains resilient, with GNPA and NNPA at 1.87% and 0.53% respectively."
In addition to its financial results, the bank's board has proposed a dividend of Rs 0.25 per equity share for the financial year 2024-25, subject to shareholder approval at the upcoming Annual General Meeting. This move reflects the bank's confidence in its earnings stability and capital position. For the full year FY25, the bank's net profit decreased by 48.4% YoY to Rs 1,525 crore, down from Rs 2,955 crore in FY24.
Furthermore, the bank's total income for the year rose to Rs 43,52,320 lakh, supported by higher interest earned and other income streams. The operating profit before provisions was reported at Rs 7,41,485 lakh, indicating solid operational performance. The gross NPA ratio stood at 1.87%, slightly better than the previous year's 1.88%, while the net NPA ratio improved to 0.53% from 0.60%.
As part of its growth strategy, an affiliate entity of Warburg Pincus LLC and a wholly-owned subsidiary of the private equity division of the Abu Dhabi Investment Authority (ADIA) have committed to invest approximately Rs 7,500 crore in the bank, pending necessary regulatory and shareholder approvals. This investment is expected to bolster the bank's Capital Adequacy Ratio and support its next phase of growth.
IDFC First Bank, which operates across 60,000 Indian cities, towns, and villages, has a customer deposit base of Rs 2,42,543 crore, loans and advances of Rs 2,41,926 crore, and 1,002 active branches nationwide. The bank boasts 35.5 million active clients and has emerged as a significant player in the Indian banking sector.
In summary, while IDFC First Bank faces challenges in its microfinance segment, its overall growth in deposits, loans, and asset quality outside this area remains strong. The proposed dividend and new investment highlight the bank's confidence in its operational resilience and future growth prospects.
