IDFC First Bank's profit nearly triples to ₹1,045 crore as bad loans shrink

IDFC First Bank’s profit nearly tripled in the July-September quarter from a year earlier, as provisions for bad loans fell and income kept climbing. The private lender’s standalone net profit rose to ₹1,044.60 crore from ₹352.31 crore a year ago, according to results its board approved on Saturday.

The profit was a little lower than the ₹1,074.96 crore it made in April-June. On a consolidated basis profit was ₹1,049.17 crore, down 8.59% from the previous quarter.

Lending and margins

Net interest income, the gap between what the bank earns on loans and pays on deposits, rose 21% from a year earlier to ₹6,188 crore, and 3.6% from the previous quarter. Interest earned rose about 20% to ₹11,921.75 crore and total income to ₹14,217.78 crore.

Loans and advances grew 30.1% to ₹3,46,913 crore, a figure that includes credit substitutes and loans backed by foreign-currency deposits. Deposits grew 25.9% to ₹3,48,583 crore and rose 11.8% in the quarter alone.

Managing director and chief executive V Vaidyanathan pointed to costs growing more slowly than income. “Opex growth lagged income growth by 500 bps for two quarters, cost-to-income continues to fall and ROA is near 1 per cent,” he said.

Cleaner books

Asset quality kept improving. Gross non-performing assets fell to 1.32% of gross advances from 1.51% in April-June and 1.86% a year ago, and net NPAs to 0.40% from 0.52% a year earlier. Provisions and contingencies came to ₹1,136.95 crore, about a fifth lower than the ₹1,451.88 crore set aside in the same quarter last year.

The capital adequacy ratio stood at 14.67%, down from 15.05% at the end of June but above the 14.11% of a year earlier.

The foreign-currency deposit rush

The quarter’s most striking number was on the liabilities side. IDFC First raised more than ₹34,000 crore through FCNR(B) deposits, the foreign-currency fixed deposits that non-resident Indians hold with Indian banks. That pulled down the share of low-cost current and savings accounts in total deposits to 48.4% from 50.1%.

Vaidyanathan said the trade-off was worth it. “Raising over Rs 34,000 crore FCNR(B) deposits gives us 3-5 year liquidity at 1 per cent lower cost than domestic deposits,” he said.

IDFC First is not alone. Kotak Mahindra Bank, which also reported on Saturday, also reported a jump in foreign-currency deposits in its quarter.

What comes next

The results are the bank’s first test in the market on Monday, when trading resumes after a week in which the Nifty Bank index fell 2.79%. Other lenders, including Tamilnad Mercantile Bank, are due to report during the week.