IDFC FIRST Bank Reports Strong Q1 Results with 61% YoY Net Profit Growth and Enhanced Asset Quality

IDFC First Bank, one of India’s prominent financial institutions, disclosed its Q1 financial results on a Saturday, showcasing an impressive net consolidated profit of ₹765 crore. This substantial figure represents a remarkable 61% increase compared to the net profit of ₹474 crore recorded during the corresponding quarter in the previous fiscal year.

Furthermore, the bank also experienced significant growth in its net interest income, which surged by 36% from ₹2,751 crore in Q1FY23 to ₹3,745 crore in Q1FY24. This robust growth in net interest income is indicative of the bank’s efficient management of its interest-earning assets and liabilities during the respective quarters.

During the April-June quarter of the current fiscal year, IDFC First Bank demonstrated robust financial performance, with its core operating profit witnessing a substantial increase of 45% to reach ₹1427 crore. This noteworthy growth in core operating profit signifies the bank’s efficiency in managing its operational expenses and maximizing earnings from its primary banking activities during the quarter. Comparatively, during Q1FY23, the bank had reported a core operating profit of ₹987 crore, highlighting the significant improvement achieved in the corresponding quarter of the previous fiscal year.

Furthermore, the bank’s net interest margin (NIM) also exhibited positive trends. Year on year, the NIM grew from 5.77% in Q1FY23 to 6.3% in Q1FY24, indicating the bank’s enhanced ability to generate interest income from its interest-earning assets in relation to its interest-bearing liabilities.

Enhanced Asset Quality:

IDFC First Bank showcased commendable improvement in its asset quality during the quarter ending on 30th June 2023. The Gross Non-Performing Assets (GNPA) ratio, which indicates the proportion of bad loans in the bank’s total loan portfolio, improved significantly to 2.17% as of 30th June 2023. This marked improvement reflects the bank’s success in reducing the burden of non-performing assets and enhancing the overall health of its loan book. In comparison, during the same period last year (30th June 2022), the GNPA ratio was higher at 3.36%, illustrating the bank’s dedicated efforts in managing and resolving problematic loans.

Moreover, the GNPA ratio also demonstrated a positive trend compared to the previous quarter. As of 31st March 2023, the GNPA ratio stood at 2.51%, indicating a reduction in non-performing assets over the course of the quarter ending on 30th June 2023.

Additionally, the bank also made significant progress in improving its Net Non-Performing Assets (NNPA) ratio, which represents bad loans after accounting for provisions made by the bank. The NNPA ratio improved from 1.30% in June 2022 to an impressive 0.70% in June 2023. This indicates a substantial decline in net non-performing assets, underscoring the bank’s efficient risk management practices and proactive measures to address potential credit risks.

Furthermore, in comparison to the NNPA ratio reported during the previous quarter (31st March 2023), which was at 0.86%, the bank exhibited further progress in reducing its net non-performing assets.

IDFC First Bank has reported robust collection efficiency for its urban retail business (excluding prepayments and EMI arrears) in the current bucket, which remains impressively high at 99.5%. This high collection efficiency indicates the bank’s successful efforts in effectively managing loan repayments and maintaining a strong repayment track record for its urban retail customers. The bank’s focus on timely collections and customer engagement has contributed to this exceptional performance, ensuring minimal delinquencies and healthy asset quality.

The provision coverage ratio (PCR) of IDFC First Bank has shown a notable improvement, increasing to 83.12% as of June 30, 2023. This signifies a significant enhancement in the bank’s capacity to set aside funds for potential loan losses and contingencies. A higher PCR indicates a more conservative and prudent approach to risk management, as the bank is adequately provisioning for potential credit losses, thereby strengthening its financial resilience. In comparison, the PCR was lower at 73.13% as of June 30, 2022, underlining the bank’s commitment to fortifying its provision reserves over the past year.

The standard restructured book, which represents loans that have been restructured without being classified as non-performing, has notably declined. As of June 30, 2023, the standard restructured book accounted for only 0.47% of the funded asset book. This demonstrates a significant reduction from the corresponding period in the previous year (June 30, 2022), where the standard restructured book stood at 1.27% of the funded asset book. Moreover, the standard restructured book also reduced from 0.59% reported at the end of the previous quarter (March 31, 2023). This decline indicates the bank’s ability to resolve and manage potential stressed assets without resorting to classification as non-performing loans.

“We are pleased to report that IDFC FIRST Bank is successfully establishing a robust and reputable franchise, evident through our high CASA Ratio of 46.5%. This reflects the strong confidence that customers place in us, and we attribute this to our positive brand image, ethical practices, customer-centric product offerings, and continuous digital innovations. Our commitment to delivering exceptional banking experiences has been pivotal in driving the growth of our retail deposits, which is a testament to the trust our customers place in us.

One of our key strengths lies in our specialization in Retail, Rural, and SME businesses, where we have demonstrated exceptional performance. Our relentless efforts in these segments have resulted in a significant reduction in Gross NPA to an impressive low of 1.53%. This signifies our efficient management of non-performing assets and our ability to maintain a high-quality loan portfolio.

Furthermore, we have also made remarkable progress in reducing Net NPA, which has now come down to a commendable 0.52%. This reaffirms our commitment to maintaining a healthy balance between risk management and growth, ensuring the financial well-being of our institution.

“We are delighted to announce that IDFC FIRST Bank has achieved a remarkable profit of Rs. 765 crore in Q1-FY24, showcasing a significant growth of 61% compared to the profit after tax (PAT) of Rs. 474 crore recorded in Q1 FY 23. This exceptional performance is a testament to our bank’s resilience, prudent strategies, and unwavering commitment to excellence.

Over the past four years, our institution has undergone transformative changes to strengthen our position in the market and enhance our customer offerings. Throughout this transformative journey, we have received exceptional support from all our valued shareholders and customers, and we extend our heartfelt gratitude for the trust and confidence placed in us.

The continuous support of our stakeholders has been instrumental in our growth and success. Their unwavering belief in our vision and mission has motivated us to deliver superior banking experiences and innovative solutions to meet the evolving needs of our customers.

As we move forward, we are confident in our ability to build on this strong foundation and further improve our performance. Our unwavering focus on customer satisfaction, product innovation, and digital advancements will be pivotal in driving our growth trajectory and cementing our position as a leading financial institution.