IDFC First Bank Q2 Review: Yes Securities Maintains Cautious 'Add' On The Stock — Here's Why

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Yes Securities Report

IDFC First Bank Ltd.'s gross non-performing asset additions amounted to Rs 22.6 billion for Q2 FY26, translating to an annualized slippage ratio of 3.6% for the quarter. (Gross NPA additions had amounted to Rs 24.86 billion during 1QFY26.).

Gross slippages declined 9% QoQ and net slippages fell 13% QoQ, largely driven by the MFI portfolio. The bank expects slippages to moderate going forward. Provisions for Q1 FYF26 were Rs 14.59 billion, down by -12.5% QoQ and -16.2% YoY.

Sequential decline is driven by lower provisioning in the MFI book. Bank has utilized Rs 750 million from the MFI buffer provision during Q2.

Post this, the bank has a contingency provision of Rs 2.4 billion for MFI. Management reiterated credit cost for FY26 is expected to be 205-210 bps.

Net interest margin was at 5.60%, down -11bps QoQ and -58bps YoY. The sequential 11 bps decline was driven by the repo rate cut, changes in asset mix, and de-growth in the MFI portfolio. NIM has bottomed out in Q2 and is expected to improve in Q3 and Q4, likely recovering to 5.8% by Q4, factoring in one additional repo rate cut.

Total gross funded assets grew by 5.3% QoQ and 19.7% YoY. The loan to deposit ratio was around 92.9% as of September 2025 as compared to 96.2% as of September 2024.

IDFC First Bank is working on disbursing 1 million loans per month going forward. The deposits were at Rs 2,767 billion, up by 4.5% QoQ and 23.8% YoY.

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