IDFCFIRSTB - IDFC FIRST BANK LIMITED Share Price

Management's outlook is optimistic, highlighting several key areas of growth and improvement. They expect a positive trajectory for the bank driven by a strong increase in customer deposits, which grew by 23.4% Y-o-Y to approximately INR 2.69 lakh crores, alongside a solid performance in retail deposits, up by 24% on average. Loan growth also remains strong at 19.7% Y-o-Y, emphasizing nearly balanced growth across sectors like mortgages and vehicle loans.

The Gross NPA has shown improvement, declining to 1.86%, while the Net NPA stands at 0.52%. Management confirmed that they believe the microfinance issue is behind them and expect to maintain stable asset quality moving forward.

For profitability, PAT for Q2 FY26 is reported at INR 352 crores, with a 76% Y-o-Y net profit increase. They project improved net interest margins (NIM), anticipated to exceed 5.8% by Q4 FY26. Operating expenses are expected to grow at a lower rate than the loan book, enhancing operational leverage.

Key forward-looking points include:

1. Loan growth targets at around 20%.
2. Credit costs projected to reduce to approximately 2.05% to 2.1% in the second half of FY26.
3. Retailization of deposits has improved significantly, with CASA ratio at 50.1% and efforts to increase current account proportions.
4. The bank plans to launch various products, enhancing offerings in credit cards, gold loans, and wealth management to boost growth and customer retention.

Overall, IDFC First Bank shows strong potential for continued growth backed by robust asset quality and profitability strategies, with a focus on building capabilities and enhancing customer engagement for sustained performance.

1. Question: "Starting with margins. As you mentioned that margins have bottomed out this quarter. But how should we see margins moving in the next 2 quarters? Like should we place 4Q '26 margins to somewhere near the 6% number of 4Q '25?"

Answer: "Yes, we expect margins to improve in Q3 and Q4. By the end of Q4, I believe margins should definitely be upwards of 5.8%. This guidance includes our expectations of another potential repo rate cut. Our focus remains on balancing interest rates while improving margins."

2. Question: "On asset quality, while the MFI slippages have halved this quarter, but the non-MFI slippages continue to be around like, what, INR20 billion-odd number? Any sectoral color on where is this slippages coming from?"

Answer: "Indeed, MFI slippages have decreased significantly. For non-MFI, we've seen a slight reduction in slippage ratio to 3.39% from 3.54%. We foresee this declining further in Q3 and Q4. Our overall guidance on credit cost remains around 2.05% to 2.1%, with expectations of lesser stress going forward."

3. Question: "In terms of ECL impact, have you done any impact analysis for IDFC? Larger banks have a big provision buffer, but IDFC doesn't have that big provision buffer. How do we look at ECL implementation?"

Answer: "It's early for a full quantification, but we anticipate an increase in provisioning for Stage 1 and Stage 2 assets. This may be offset by lower provisioning requirements for Stage 3 assets, considering our conservative approach with a PCR of 72%. We are actively working on the transition to the ECL framework."

4. Question: "Just to go back to how we are looking at the exit for this year. So what are we broadly looking at in terms of ROA by Q4? Does that still stand broadly?"

Answer: "While we can't pinpoint exact ROA figures, we are confident that credit costs will decline, and margins should improve. Overall, the trajectory for the next few quarters appears positive, and we expect credit costs to blend downwards towards the noted range."

5. Question: "What is our CASA growth outlook, and should we expect to leverage the SA rate cuts to improve NIMs?"

Answer: "That lever can certainly be pressed down the line; however, we are currently focused on building the deposit side and achieving a better credit-deposit ratio. Our rates are competitive, and while we could cut SA rates, we prefer to wait until we stabilize our deposit growth."