IDFC First Bank Shares Drop Sharply After Weak Q3 Results

Shares of IDFC First Bank Ltd. dropped by 7.74% following the lender’s disappointing quarterly results for the period ending December 2024. The private-sector lender reported a significant 53% decline in its profit year-on-year (YoY), posting a net profit of Rs 716 crore. The drop in profit was attributed to a substantial increase in provisions, particularly for its microfinance institutions segment.

While the bank’s net profit fell sharply on a YoY basis, it showed an improvement of 69% sequentially, reflecting a better performance compared to the previous quarter. However, the higher provisioning for stressed loans in the MFI segment weighed heavily on the bank's financial results.

The MFI segment has been facing challenges, including a slowdown in loan disbursals, leading the bank to increase its provisions. Provisions and contingencies for the quarter doubled to Rs 1,338 crore from the year-ago period, with a significant portion attributed to higher slippages in the MFI loan book. Excluding microfinance, provisions in other segments remained stable.

Despite the rise in provisions, IDFC First Bank managed to grow its net interest income (NII) by 14% YoY to Rs 4,902 crore. However, its net interest margin (NIM) saw a decline, falling to 6.04%, down from 6.18% in the previous quarter. The decline in NIM was largely attributed to a reduction in the microfinance business and an increased focus on wholesale banking.

On a positive note, IDFC First Bank continued to see strong growth in its overall loan book. Advances rose by 22% YoY, reaching Rs 2.31 lakh crore. The retail loan book grew by over 21%, while the non-infrastructure corporate book expanded by nearly 29%. The microfinance portfolio as a percentage of the overall loan book reduced to 4.8%, down from 5.6% in the previous quarter.

The scrip fell as much as 7.74%% to Rs 57.45 apiece. It pared losses to trade 5.81% lower at Rs 58.65 apiece, as of 09:48 a.m.

It has fallen 29.76% in the last 12 months. Total traded volume so far in the day stood at 10 times its 30-day average. The relative strength index was at 34.

Out of 22 analysts tracking the company, 11 maintain a 'buy' rating, six recommend a 'hold,' and five suggest 'sell,' according to Bloomberg data. The average 12-month consensus price target implies an upside of 14.6%