IDFC First Bank shares slumps over 8% after weak Q3 results; here's what went wrong
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Shares of IDFC First Bank dropped over 8% today after the private lender reported a sharp 53% year-on-year decline in its third-quarter net profit, which stood at ₹339 crore. The decline was largely attributed to a significant rise in provisions for its stressed microfinance portfolio.
The bank’s provisions more than doubled, soaring by 104% to ₹1,338 crore in Q3FY25, due to increased slippages in its microfinance business. Despite these setbacks, the bank reported a 14% growth in Net Interest Income (NII) at ₹4,902 crore, and Other Income saw a 20% rise, reaching ₹1,757 crore.
As of 2.30 pm today, the shares of the lender were trading at ₹56.99 a piece.
The bank's profitability, as per its Q3 results, was further dented as the Net Interest Margin (NIM) contracted to 6.04%, down from 6.42% in the same period last year. The bank attributed this decline to reduced contributions from its microfinance portfolio and a shift toward a higher composition of wholesale banking.
Gross Non-Performing Assets (GNPA) rose marginally to 1.94% compared to 1.92% in the previous quarter. The lender’s troubled microfinance portfolio saw a significant contraction of 19%, reducing to ₹10,997 crore. Nonetheless, overall gross advances displayed robust growth of 22%, reaching ₹2,31,074 crore.
Commenting on the results, MD & CEO V Vaidyanathan acknowledged the challenges in the microfinance segment but expressed optimism, calling the issues "temporary." He added that the bank expects resolution within the next few quarters.
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On the deposits front, IDFC First Bank recorded strong growth, with total deposits increasing 29% year-on-year to ₹2,27,316 crore. However, CASA (current account and savings account) deposits saw a slight decline, falling to 47.7% of total deposits, compared to 48.44% in the same period last year.
The bank’s performance highlights a mix of growth in its core business areas and the ongoing strain from its microfinance challenges, which are being closely watched by investors and analysts.