IDFC First Bank shares slumps over 8% after weak Q3 results; here's what went wrong

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.

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.