IDFCFIRSTB - IDFC FIRST BANK LIMITED Share Price

Outlook by Management:
IDFC First Bank's management maintains a cautiously optimistic outlook, expecting near-term challenges from the microfinance (MFI) segment but confidence in long-term growth driven by diversified businesses and operational efficiency. Key points include:

1. Growth & Deposits:

   • Advances grew 22% YoY; deposits up 29%, with retail deposits and CASA rising 30% and 32%, respectively.
   • Targeting 20% loan growth and 22-24% deposit growth annually, aiming for Rs.5 lakh crore loans and Rs.6 lakh crore deposits by FY29.

2. Asset Quality & MFI Impact:

   • Gross NPA at 1.94% (1.81% ex-MFI); net NPA at 0.52%.
   • MFI stress (8% credit cost) to peak in Q4 FY25, with gradual improvement thereafter. Provisions remain conservative, with 70% coverage for insured MFI loans.

3. Profitability Drivers:

   • Focus on scaling high-margin products (credit cards, wealth management) and improving cost efficiency.
   • Operating expense growth to slow to ~13% in FY26 via branch optimization, tech upgrades, and cost controls.

4. Long-Term Targets:

   • ROA expected to surpass 2% as MFI normalizes and operating leverage improves.
   • Cost-to-income ratio aimed at ~65% by FY27, driven by scale and digital transformation.

Major Highlights:

• Diversification: Investing in integrated offerings (cards, cash management) to deepen customer relationships.
• Technology & Customer Experience: Core to sustaining deposit traction and cross-selling.
• Provisions & Capital Adequacy: Strong capital position (CET1: 13.68%) buffers near-term MFI risks.

Management projects FY26 as a turnaround year, with normalized credit costs and improved margins post-MFI resolution.

Question 1:
Gao Zhixuan (Schonfeld): "Congratulations on a good quarter. Just on the MFI, do you mind sharing with us your outlook because the SMA-1 plus 2 seems to have increased sequentially more than what we have seen in some peers. So do you mind sharing with us what kind of credit costs are we expecting in the next 1, 2 quarters? And also on the overall credit cost, how are we thinking about FY25 because our previous guidance is, I think, 225 basis points. And just look at 9 months, I don't know whether that still stands."

Answer Summary:
Management expects MFI credit costs to peak in Q4 FY25 (current quarter) due to holiday-related collection disruptions. Ex-MFI credit costs remain stable at ~1.8%. FY25 guidance of 225 bps may slightly increase due to MFI stress but is expected to normalize as MFI provisions taper from Q1 FY26.

Question 2:
Jai Mundhra (ICICI Securities): "Sir, first question is on MFI only. So outstanding book is around INR10,900 crores, that is the MFI book. But I wanted to check, is there any other loans that we offer to this customer, maybe 2-wheeler, maybe small auto loan or any other PL loan or that these customers get only MFI loans from us?"

Answer Summary:
MFI customers are not cross-sold other products (e.g., 2-wheeler loans, personal loans). The MFI book is standalone, with weekly collection cycles. Karnataka constitutes ~9% of the MFI portfolio.

Question 3:
Jai Mundhra (ICICI Securities): "Sir, your assessment of the current situation in the state of Karnataka? And what is the portfolio that we have in the state of Karnataka."

Answer Summary:
Karnataka accounts for 9% of the MFI portfolio. Recent state-level developments (e.g., government interventions) are being monitored, but no immediate material impact is anticipated.

Question 4:
Piran Engineer (CLSA): "On MFI, the 3-member rule that's coming up next quarter. Have we proactively moved to that?"

Answer Summary:
The bank adheres to industry norms but uses enhanced internal scorecards (beyond blunt rules like lender caps) to mitigate risks. MFI disbursements are now largely insured via CGFMU, with ~70% future loss recoupment.

Question 5:
Rohan Mandora (Equirus Securities): "Sir, this was on the deposit piece. [...] how is the mix of new-to-bank customers on deposits vis-à-vis the organic growth on deposits?"

Answer Summary:
Deposit growth (~29% YoY) is driven by new customer acquisition (NTB), supported by seamless onboarding journeys. Affluent customers (e.g., home loan/wealth management clients) contribute meaningfully, while mass-market borrowers (e.g., 2-wheeler loans) have limited liability traction.

Question 6:
Anand Dama (Emkay Global): "My first question is on your opex. [...] Any 3 to 4 key drivers that you see where basically you will see this kind of a cost reduction going forward?"

Answer Summary:
Opex growth will moderate to ~13% in FY26 (vs. 18% in 9M FY25) due to (1) slower branch expansion (100 vs. 27 added in FY25), (2) tech cost optimization, (3) employee cost leverage, and (4) volume-linked expense rationalization (e.g., rewards, collections).

Question 7:
Anurag Mantry (Oxbow Capital): "Just one question on the credit cost ex MFI. [...] Do you see the current level is more stable? Do you see maybe potential for some more increase?"

Answer Summary:
Ex-MFI credit costs are range-bound (1.7"“1.8%) with no spillover risks. Retail/wholesale asset quality remains stable (e.g., 2-wheeler GNPA at 1.63%, credit card SMA improving to 1.32%). Core book resilience offsets MFI volatility.