IDFC FIRST Bank Limited Q3 FY26 Earnings Call Summary

Summary

IDFC FIRST Bank Limited - Q3 FY 2026 Earnings Call Summary Saturday, January 31, 2026, 6:00 PM IST

Event Participants

Executives 3 Saptarshi Bapari (Head Investor Relations and ESG), Sudhanshu Jain (CFO and Head of Corporate Center), V. Vaidyanathan (MD & CEO)

Analysts 4 Akshay Jain (Autonomous Research), Jai Mundhra (ICICI Securities), Param Subramanian (Investec), Piran Engineer (CLSA Limited)

Financials & KPIs

Geographic & Segment Commentary

• Microfinance (MFI): Book stands at ₹6,657 crores (2.4% of total loans). Collection efficiency reached pre-crisis levels of 99.4%, with insurance coverage increasing to 81%.
• Retail, Rural & MSME: This segment saw GNPA improve to 1.55%. Asset quality remains healthy with SMA-1 & 2 stable at 0.88%.
• Credit Cards: Reached 4.3 million cards in force with a book size of ₹9,100 crores. Spends grew 35% YoY; portfolio mix consists of 16.5% revolvers, 36% EMI, and 47.5% transactors.
• Wealth Management: Assets Under Management (AUM) reached nearly ₹60,000 crores, growing at 31% YoY.

Company-Specific & Strategic Commentary

• Liability Repricing: The Bank aggressively cut Savings Account (SA) rates (e.g., 200 bps cut in the ₹5-10 lakh bucket). This is expected to reduce SA costs by 15-16 bps in Q4 FY26.
• Cost of Funds Convergence: Management highlighted that cost of funds has dropped 169 bps over 7 years to 6.11%, now at par with mid-tier bank averages (6.09%).
• Digital Scale: The bank processed approx. 1.3-1.4 million loans in October alone using automated identity, bureau, and fraud checks, demonstrating high technological throughput.
• Legacy Transition: CEO noted the bank has successfully reduced the Credit-to-Deposit ratio from 137% at merger to 94% today while retiring high-cost wholesale liabilities.

Guidance & Outlook

Risks & Constraints

Q&A Highlights

Savings Account Rate Strategy

• Question: Will further SA rate cuts be used to protect margins? (Akshay Jain)
• Answer: The bank will balance rates with growth needs. Currently, fewer branches (1,066) are used to raise large deposits, meaning higher rates replace some branch opex. As the network grows, rates can fall further (V. Vaidyanathan).

Microfinance Recovery

• Question: How are MFI provisions and insurance claims being handled? (Param Subramanian)
• Answer: The bank provides 100% at 180 days even for insured books. Recoveries from CGFMU guarantees will lead to future write-backs (Sudhanshu Jain).

Margin Drivers

• Question: What drove the 17 bps NIM expansion this quarter? (Akshay Jain)
• Answer: 12 bps from lower cost of funds, 3 bps from lower CRR (4% to 3%), and the remainder from full-quarter impact of capital infusion (Sudhanshu Jain).

Operational DNA

• Question: Will you shift entirely to safe/low-yield segments? (Piran Engineer)
• Answer: While the bank will move toward safer mortgages, it will maintain its DNA of using 100+ machine-learning scorecards to serve underserved segments profitably (V. Vaidyanathan).

Key Takeaway

IDFC FIRST Bank delivered a pivotal quarter marked by a 43% sequential jump in PAT to ₹503 crores and a 17 bps expansion in NIMs to 5.76%. The bank successfully navigated the tail-end of microfinance stress, with MFI collection efficiency normalizing to 99.4% and the overall GNPA improving to 1.69%. Strategically, the bank has transitioned from a high-cost DFI-legacy structure to a retail-funded powerhouse, with CASA reaching a milestone of ₹1.5 lakh crores (51.6% ratio). Management remains focused on “thinking long,” leveraging a highly automated digital lending engine to drive 20% growth while aggressively repricing liabilities to bring cost of funds below 6%. While operating expenses remain high due to the build-out phase, the bank is clear on its trajectory toward a 1.6% ROA as operating leverage kicks in, provided unsecured credit costs remain within the historical 2% threshold.