IDFC First Bank announced its financial results for the fourth quarter (January–March) of the financial year 2024–25 (Q4 FY25) on April 26, 2025, revealing a complex performance marked by a significant decline in net profit, robust growth in loans and deposits, and a proposed dividend. The results, approved during a Board of Directors meeting, reflect both the bank’s resilience and the pressures it faces in a challenging economic environment. Here’s a detailed breakdown of the key highlights, financial metrics, and implications for investors and stakeholders.
Key Financial Highlights : IDFC First Bank Q4 FY25 Results
Sharp Decline in Net Profit
IDFC First Bank reported a consolidated net profit of ₹304.1 crore for Q4 FY25, a steep 58% year-on-year (YoY) decline compared to ₹724.3 crore in Q4 FY24.
This figure also fell short of analyst expectations, which had projected a net profit of around ₹359.6 crore, according to a CNBC-TV18 poll.
The significant drop was primarily attributed to elevated provisions, particularly in the microfinance segment, and challenges in asset quality. Sequentially, the net profit saw a 10.3% decline from ₹339 crore in Q3 FY25.
Net Interest Income Growth
Despite the profit downturn, the bank’s net interest income (NII) showed resilience, rising 9.8% YoY to ₹4,907.1 crore from ₹4,468.9 crore in Q4 FY24. However, this figure was slightly below the CNBC-TV18 poll estimate of ₹5,080.2 crore. On a sequential basis, NII grew by a modest 2.8% from ₹4,902 crore in Q3 FY25.
The growth in NII was supported by steady loan expansion, though margins faced pressure due to interest reversals and a shift in portfolio composition toward lower-yielding wholesale banking.
Non-Interest Income and Operating Profit
Non-interest income, a critical component of the bank’s revenue, grew by 15.7% YoY to ₹1,899 crore from ₹1,642 crore in Q4 FY24, driven by fee-based income and other sources. Sequentially, it increased by 6.7% from ₹1,780 crore.
The bank’s pre-provisioning operating profit (PPOP) also saw a healthy 12.2% YoY rise to ₹1,867 crore from ₹1,664 crore, and a 6.2% sequential increase from ₹1,759 crore in Q3 FY25, bolstered by non-interest income growth.
Provisions and Contingencies
Provisions and contingencies rose significantly, reaching ₹1,450 crore in Q4 FY25 compared to ₹1,330 crore in Q3 FY25, reflecting heightened caution in the microfinance and non-microfinance portfolios.
This increase in provisions was a major factor in the net profit decline, as the bank sought to buffer against potential asset quality deterioration.
Dividend Proposal
In a move to reward shareholders, the bank’s board proposed a dividend of ₹0.25 per share for FY25, subject to approval at the upcoming Annual General Meeting (AGM).
This decision, despite the profit decline, signals confidence in the bank’s long-term financial stability and capital adequacy. The proposed dividend was factored into the bank’s capital adequacy ratio calculations as of March 31, 2025.
Business Growth: Loans and Deposits
IDFC First Bank continued to demonstrate strong growth in its core banking operations, with both loans and deposits showing robust YoY increases.
Loans and Advances:
Loans and advances grew by 20.3% YoY to ₹2.41 lakh crore as of March 31, 2025, from ₹1.94 lakh crore a year earlier. Sequentially, loans rose by 4.7% from Q3 FY25. Analysts at Motilal Oswal Financial Services (MOFSL) had estimated loans at ₹2.34 lakh crore, indicating the bank outperformed expectations in loan growth.
Customer Deposits:
Customer deposits surged by 25.2% YoY to ₹2.42 lakh crore from ₹1.93 lakh crore as of March 31, 2024. On a quarter-on-quarter (QoQ) basis, deposits grew by 6.7%. MOFSL had projected deposits at ₹2.50 lakh crore, suggesting a slight shortfall. The Current and Savings Account (CASA) deposits increased by 24.8% YoY to ₹1.18 lakh crore, with a CASA ratio of 46.9%, slightly down from 48% in Q3 FY25.
Total Business:
The bank’s total business (loans and advances plus customer deposits) expanded by 22.7% YoY to ₹4.84 lakh crore, reinforcing its growth momentum. The credit-deposit ratio stood at 93.8%, reflecting a balanced approach to lending and deposit mobilization.
Asset Quality: Marginal Deterioration
Asset quality showed slight signs of stress in Q4 FY25, with the gross non-performing asset (GNPA) ratio improving marginally to 1.87% from 1.94% in Q3 FY25 but rising from 1.88% in Q4 FY24. The net non-performing asset (NNPA) ratio edged up to 0.53% from 0.52% QoQ, compared to 0.60% in Q4 FY24.
Analyst estimates had projected a GNPA of 2% and an NNPA of 0.6%, indicating that the bank performed better than expected in maintaining asset quality, though challenges persist, particularly in the microfinance segment.
The bank highlighted that it is closely monitoring its microfinance loan book due to industry-wide pressures, which contributed to higher provisions and a decline in net interest margins (NIM).
The NIM contracted to 6.04% in Q4 FY25 from 6.18% in Q3 FY25, largely due to reduced microfinance disbursals and an increased share of wholesale banking, which typically yields lower margins.
Capital Adequacy and Strategic Developments
IDFC First Bank maintained a strong capital position, with a Capital Adequacy Ratio (CRAR) of 16.11% as of December 31, 2024, post-merger with IDFC Ltd. in October 2024.
The merger added ₹618 crore to the bank’s net worth while reducing the outstanding share count by 16.64 crore shares. The Common Equity Tier-1 (CET-1) ratio stood at 13.68%, underscoring the bank’s ability to absorb potential shocks.
The bank’s focus on retail banking, rural banking, and SME financing continued to drive its growth strategy. Since its merger with Capital First in 2018, IDFC First Bank has significantly expanded its retail deposit base, which now constitutes 78% of total deposits, up from 27% in 2015. The bank operates 944 branches and 1,164 ATMs, supporting its outreach efforts.
Analyst Perspectives and Market Reaction
Analysts had anticipated a challenging quarter for IDFC First Bank, with projections of a 46.2% YoY net profit decline to ₹389 crore, according to Axis Securities. The actual 58% drop was steeper than expected, driven by higher-than-anticipated provisions and margin compression.
Motilal Oswal noted that the cost-to-income ratio is likely to remain elevated, potentially capping pre-provision operating profit growth, while credit costs could stay high due to microfinance pressures.
Despite the profit decline, some brokerages remain optimistic about the bank’s long-term prospects.
The bank’s share price, however, faced pressure ahead of the results, trading at ₹67.83 on April 24, 2025, reflecting investor caution. Posts on X echoed mixed sentiments, with some users highlighting the below-estimate results and others focusing on the bank’s strong business growth metrics.
Challenges and Opportunities
IDFC First Bank faces several challenges, including:
- Elevated Provisions: The rise in provisions, particularly for microfinance loans, has significantly impacted profitability.
- Margin Pressure: The contraction in NIM due to portfolio shifts and interest reversals poses a near-term challenge.
- Asset Quality Concerns: While GNPA and NNPA ratios are relatively stable, the microfinance segment remains a risk area amid industry-wide stress.
However, opportunities abound:
- Robust Loan and Deposit Growth: The bank’s 20.3% YoY loan growth and 25.2% deposit growth position it well for future revenue expansion.
- Capital Infusion: The proposed ₹75 billion capital raise could enhance the bank’s ability to sustain growth and improve operating leverage.
- Fee-Based Income: A 15.7% YoY rise in non-interest income highlights the potential for diversifying revenue streams.
Conclusion
IDFC First Bank’s Q4 FY25 results present a mixed picture: a sharp 58% YoY decline in net profit to ₹304.1 crore, driven by higher provisions and asset quality challenges, was offset by strong growth in loans (20.3% YoY), deposits (25.2% YoY), and non-interest income (15.7% YoY). The proposed ₹0.25 per share dividend reflects confidence in the bank’s capital position, while the 22.7% YoY increase in total business underscores its growth momentum.
For investors, the results highlight both risks and opportunities. While near-term profitability remains under pressure, the bank’s focus on retail and SME banking, coupled with strategic capital infusion plans, positions it for long-term growth. Stakeholders will likely keep a close eye on management commentary regarding microfinance portfolio management, cost control, and margin stabilization in the coming quarters.
As IDFC First Bank navigates a complex economic landscape, its ability to balance growth, asset quality, and profitability will be critical to sustaining investor confidence and achieving its strategic objectives.
Disclaimer: This article is for informational purposes only and should not be considered investment advice. Investors are advised to consult certified financial advisors before making decisions.
