IDFC First Bank Q2 profit rises 76% on lower provisions; NIM narrows

Loan growth strong, microfinance stress eases, says CEO Vaidyanathan

IDFC First Bank on Saturday reported a 75.6 per cent year-on-year rise in net profit for the quarter ended September 30, 2025, to ₹352 crore, driven by a 16 per cent fall in provisions — mainly in the microfinance portfolio — to ₹1,452 crore from ₹1,732 crore in the year-ago period.

 

Net interest income (NII) grew 6.8 per cent to ₹5,113 crore, while the net interest margin (NIM) declined 59 basis points year-on-year to 5.59 per cent. The NIM for the preceding quarter (Q1 FY26) stood at 5.71 per cent.

 

Fee and other income rose 13.2 per cent to ₹1,836 crore, even as trading gains fell 47.1 per cent to ₹56 crore during the quarter under review. 

 

Pre-provision operating profit (PPOP) declined 4.2 per cent to ₹1,880 crore.

 

The private sector lender reported a 19.7 per cent year-on-year growth in loans to ₹2.23 trillion, led by mortgages, vehicle loans, and consumer loans. However, its microfinance portfolio shrank 41.6 per cent year-on-year as of September 30, 2025, forming 2.7 per cent of funded assets compared with 5.6 per cent a year earlier.

 

The bank attributed the lower provisions to reduced stress in its microfinance book. It utilised ₹75 crore from its microfinance provision buffer during Q2 FY26 and continues to hold ₹240 crore as contingent provision.

 

“The stress in the MFI business was an industry-wide issue and looks like it is behind us,” said V. Vaidyanathan, managing director and chief executive officer of IDFC First Bank. He added that the bank expects its cost of funds to decline in the coming quarters.

 

Customer deposits rose 23.4 per cent year-on-year to ₹2.18 trillion, with current and savings account (CASA) deposits forming 50 per cent of the total.

 

Asset quality improved, with gross non-performing assets (NPA) falling six basis points year-on-year to 1.86 per cent, while net NPA increased marginally to 0.52 per cent.

 

Following the conversion of ₹7,500 crore raised through Compulsorily Convertible Preference Shares (CCPS) into equity, the bank’s capital adequacy ratio and Tier-1 ratio would stand at 16.82 per cent and 14.75 per cent, respectively, based on the financials as of September 30, 2025.