Explained: Why IDFC First Bank shares fell 10% in early trade today

Mon Oct 28 09:12:15 UTC 2024: ## IDFC First Bank Shares Plunge After Profit Dip, Microfinance Woes

**Mumbai, India** – Shares of IDFC First Bank plummeted by 10% in early trade on Monday, hitting a 52-week low of Rs 59.24 on the Bombay Stock Exchange (BSE). The sharp decline followed the bank’s announcement of a 73% drop in profit for the quarter ended September 2024, a significant downturn from Rs 751 crore last year. The bank attributed the decline to a substantial increase in provisions for potential losses in its microfinance business, totaling Rs 568 crore.

While investors reacted negatively to the profit slump, IDFC First Bank showcased strong growth in other areas. Net Interest Income (NII) saw a robust 21% year-on-year increase, reaching Rs 4,788 crore in Q2 FY25, driven by the bank’s focus on expanding its core lending business. Customer deposits also surged by 32.4% year-on-year, with retail deposits registering an impressive 37.4% growth. The bank’s CASA ratio, a key indicator of deposit stability, stood at a healthy 48.9%.

Despite the challenges in the microfinance sector, IDFC First Bank reported improvements in asset quality, with Gross Non-Performing Assets (NPA) decreasing to 1.92% in September 2024 from 2.11% a year earlier. Net NPA also improved, falling to 0.48% from 0.68% over the same period.

However, the bank’s profit after tax (PAT) took a significant hit, declining 77% year-on-year and 74% quarter-on-quarter, largely due to the jump in credit costs. This led brokerage firm Nuvama to maintain a ‘Hold’ rating on IDFC First Bank, though it reduced its target price from Rs 72 to Rs 60, citing rising credit costs and lower profits.

Despite the recent challenges, IDFC First Bank remains optimistic about its core operations. The bank’s management acknowledged the stress in the microfinance industry, but highlighted strong performance in other areas like personal loans and consumer credit. With continued focus on stable retail growth, expansion of its core lending business, and improved asset quality, the bank is aiming for a more positive trajectory in the coming quarters.