IDFC First Bank Ltd: Navigating Strong Deposit Growth and Loan Expansion in Q2 2025

IDFC First Bank Ltd (BOM:539437) has reported a robust performance in the second quarter of 2025, marked by strong deposit growth and loan expansion. The bank's ability to maintain a stable funding base and robust asset quality has positioned it well in the competitive banking landscape. This article delves into the key highlights of IDFC First Bank's Q2 2025 earnings call and explores the strategies that have contributed to its success.


IDFC First Bank's loan book also witnessed a significant expansion, growing by 25% YoY. The bank maintained good asset quality, with a gross NPA (Non-Performing Asset) ratio of 1.57% and a net NPA ratio of 0.53%. This strong performance was supported by a AAA rating from CRISIL for the bank's fixed deposit program, highlighting its robust financial position and management practices.


However, the bank faced significant provisions this quarter, totaling INR1,732 crores, primarily due to issues in the microfinance (MFI) business and a toll road account. The MFI business experienced increased delinquencies, leading to a conservative contingency provision of INR315 crores. A toll road account required a 100% provision of INR250 crores due to a government directive halting toll collections, impacting profitability. The overall credit cost, excluding MFI and toll provisions, was 1.8%, indicating challenges in maintaining low credit costs across the board.

IDFC First Bank's profitability was impacted by these additional provisions, with a reported profit after tax of INR201 crores. The bank's management acknowledged the challenges and expressed caution about project infrastructure financing due to external risks. They also highlighted the stability and growth of the housing finance sector, which is expected to continue in the coming quarters.

In conclusion, IDFC First Bank Ltd has demonstrated strong deposit growth and loan expansion in Q2 2025. The bank's ability to maintain a stable funding base and robust asset quality, despite facing significant provisions, underscores its resilience and strategic positioning in the competitive banking landscape. As the bank continues to navigate the challenges and opportunities in the market, investors should closely monitor its progress and the evolving macroeconomic environment.