IDFC First Bank has started FY26 with a sharp drop in its Q1 net profit. The bank reported a profit of Rs 462.6 crore, down 32% from Rs 681 crore in the same quarter last year.
At first glance, the fall in profit looks steep. But there’s more to the story.
The bank’s net interest income (NII) still grew by 5% year-on-year. It went up to Rs 4,933 crore from Rs 4,695 crore. That means the bank’s core lending business is still moving forward.
However, the trouble is coming from another direction: asset quality.
The gross non-performing assets (GNPA) rose to 1.97% from 1.87% last quarter. That’s not a huge jump, but it’s still a sign of rising stress in the loan book. Gross NPA value also rose to Rs 4,867.5 crore from Rs 4,433.5 crore. The net NPA moved up slightly to 0.55% from 0.53%, reaching Rs 1,346 crore.
Another pressure point was the net interest margin (NIM). It slipped by 24 basis points quarter-on-quarter, falling from 5.95% to 5.71%. The bank said this was due to the repo rate impact and a change in its asset mix.
The stock market didn’t take the news well. Shares of IDFC First Bank dropped 3.1% to Rs 70.63 after the result. But if you look at the bigger picture, the stock is still up 10% for the year.
MD and CEO V Vaidyanathan tried to keep the tone positive. He said the bank’s deposit base is growing well, up 25.5% year-on-year. He also said that after a planned equity raise, the bank’s capital adequacy would be a healthy 17.6%.
He acknowledged the hit on margins but expects recovery. “Margins will improve in the second half of FY26,” he said. The impact from microfinance (MFI) stress is also likely to ease by then.
He added, “Our core franchise is strong. Except for microfinance, asset quality is solid.”
So what’s the bottom line?
Yes, the profit is down and asset stress is real. But the bank’s funding remains strong. If it can manage MFI risks and improve margins, IDFC First Bank may bounce back in the next two quarters.
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