Synopsis: IDFC First Bank is exhibiting initial indications of a reversal situation as the bank’s margins are getting stable, the quality of its assets is improving, and the fresh lending avenues are expanding.
IDFC First Bank is drawing investor attention as signs of a potential turnaround emerge. With improving margins, steady deposit growth, and new business engines gaining traction, the bank appears to be setting the stage for a stronger financial recovery. This article explores whether IDFC First Bank can truly stage the comeback the market is hoping for.
With a market capitalisation of Rs 69,012 crore, the shares of IDFC First Bank Ltd closed at Rs 80.30 per share on Wednesday, down 0.80 percent from its previous day’s closing price of Rs 80.94 per share. Over the past five years, the stock has delivered a return of 114 percent, underperforming NIFTY 50’s return of 91 percent.
Revenue and Profitability
IDFC Bank reported a Net Interest Income (NII) of Rs 5,113 crore in Q2 FY26, representing a 6.8 percent growth from Rs 4,788 crore in Q2 FY25. Additionally, it recorded a slight growth of 3.6 percent from its previous quarter figure of Rs 4,933 crore.
Coming to its profitability front, IDFC Bank reported a net profit of Rs 352 crore in Q2 FY26 as compared to Rs 201 crore in Q2 FY25, which is a staggering growth of Rs 76 percent. However, it recorded a decline of 24 percent from its previous quarter profit of Rs 463 crore.
Asset Quality
IDFC First Bank’s asset quality strengthened during the period. GNPA declined by 6 bps to 1.86 percent as compared to 1.92 percent in Q2 FY25. However, NNPA slightly increased by 4 bps and currently stands at 0.52 percent as compared to 0.48 percent in Q2 FY25. Provision Coverage Ratio (PCR) increased by 307 bps to 72.2 percent in Q2 FY26 as compared to 75.27 percent in Q2 FY25. Since the pandemic (March 2019), its PCR has grown to 72.2 percent from just 48.2 percent in FY19, showcasing the bank’s significant turnaround in managing its bad loans.
Deposits and Advances Growth
IDFC Bank’s total deposits have surged by 23.4 percent to Rs 2,69,094 crore in Q2 FY26 as against Rs 2,18,026 crore in Q2 FY25. CASA deposits were Rs 1,38,583 crore which grew by 27 percent YoY. CASA deposits accounted for 50.1 percent of the total deposits as of September 30, 2025. Coming to total advances, it has a total loan book of Rs 2,66,579 crore, which grew by 20 percent YoY and 5 percent QoQ.
Future Highlights
IDFC First Bank’s management cited that its profits should improve in the coming quarters as margins (NIM) begin to rise again. They explained that interest margins have already hit their lowest point (5.6 percent) and are expected to climb back toward 5.8% by Q4. This means the bank will earn more money from the loans it gives, helping its overall financial performance look stronger.
The bank also expects its costs to come down. Credit costs are set to fall because asset quality has improved and stress in the microfinance book is reducing. It expects H2 credit costs to come down to 2.1 percent from 2.45 percent in H1. At the same time, the bank is building a better deposit base, aiming to bring its credit-deposit ratio down to the mid-80s. A stronger deposit franchise and lower funding costs will support stable growth and better profitability.
Looking ahead, the bank is confident about the future because many new business lines are scaling up. It is expanding into gold loans, tractor loans, rural lending, and wealth management, which it hopes to grow to Rs. 2–3 lakh crore in assets. With expenses rising slower than income, the bank expects operating leverage to kick in, helping improve ROA, ROE, and overall financial strength in the coming years.
IDFC First Bank looks set to improve its performance as it earns better margins, reduces bad-loan costs, and grows its deposits. The bank is also expanding into new areas like gold loans and wealth management. With these steps, it expects profits to grow and its overall financial strength to become better in the coming quarters.
Written by Satyajeet Mukherjee
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