IDFC First Bank CEO V Vaidyanathan says microfinance stress is over, eyes 5.8% NIM in FY26

Core Viewpoint - IDFC First Bank has overcome the challenges posed by its microfinance portfolio, with expectations for improved net interest margins and steady growth in asset quality and credit costs [1][5]. Financial Performance - The bank's net interest margin (NIM) is currently at 5.59%, with expectations to exceed 5.8% in FY26 as fixed deposits reprice lower [8][13]. - The bank's gross and net NPAs have declined both year-on-year and sequentially, indicating a recovery in asset quality [5][10]. - Special Mention Account (SMA) numbers and slippages have consistently improved over the past six quarters, leading to a reduction in credit costs [2][5]. Deposit Growth - IDFC First Bank's deposit base has increased from ₹40,000 crore in December 2018 to ₹2.7 lakh crore, representing more than a sixfold rise [6][7]. - Annual deposit growth is approximately ₹45,000–50,000 crore, reflecting the trust built with customers [7]. CASA Ratio and Cost of Funds - The bank's CASA ratio remains robust at over 50%, supported by competitive savings rates, with a goal to stabilize it in the 45–50% range [9]. - The easing of deposit costs is expected to contribute positively to NIM and overall income growth [8][13]. Future Outlook - The bank anticipates that its microfinance book will stabilize by Q4 FY25, with growth resuming alongside the broader portfolio thereafter [12]. - The initial assessment of new Expected Credit Loss (ECL) norms and regulatory changes appears favorable, with a marginally positive impact expected [11].