Private lender IDFC First Bank reported a net profit of Rs 605 crore for the fiscal third quarter ended December 2022, up 115% from Rs 281 crore a year ago, as core operating income saw strong growth.

“We have registered our highest ever profit of Rs 605 crore in Q3-FY23 and our return on equity has now moved firmly into double digits,” said IDFC First Bank managing director and CEO V Vaidyanathan.

Net Interest Income (NII) grew 27% year-on-year to Rs 3,285 crore from Rs 2,580 crore in the year-ago quarter.

Core operating income (NII plus Fees, excluding trading gains) grew 32% to Rs 4,402 crore from Rs 3,324 crore. Operating expenses grew at 23% YoY, which resulted in improved operating leverage.

Core operating profit (excluding trading gains) jumped 64% YoY to Rs 1,225 crore in the December quarter from Rs 745 crore in Q3-FY22.

The bank’s provisions increased 15% YoY to Rs 450 crore from Rs 392 crore in the earlier-year quarter.

According to IDFC First Bank, the RoA (annualised) increased from 0.64% in Q3-FY22 to 1.11% in Q3-FY23, while the RoE (annualised) increased from 5.44% in Q3-FY22 to 10.72% in Q3-FY23.

Customer deposits rose 44% to Rs 1.23 trillion as of December 2022, while CASA (current account savings account) deposits grew 39% YoY to Rs 66,498 crore. 

The CASA ratio declined to 50% from 51.6% a year ago. Retail deposits made up 77% of total customer deposits as of December 31, 2022.

“We have now built a strong foundation for the bank with CASA ratio at 50% and strong retail deposit franchise contributing 77% of the overall customer deposits,” said Vaidyanathan.

The bank’s asset quality continued to improve with gross non-performing assets (NPA) falling to 2.96% from 3.96% a year ago. 

Net NPA improved to 1.03% from 1.74% in the earlier-year quarter.

“Our asset quality continues to remain strong. On the retail side, where our bank particularly specialises in, the gross NPA has come down to 1.87% and the net NPA has come down to 0.70%, against the guidance of gross NPA and net NPA of 2% and 1%, respectively. We are confident that our improvement trend would continue going forward as the issues on legacy wholesale book, especially in infrastructure finance, are addressed and the book continue to run down," said Vaidyanathan.

Infrastructure financing reduced by 31% YoY and constituted only 3.7% of total funded assets as of December 31, 2022.

The bank’s retail and commercial credit portfolio, which is the majority part of the overall book, is “highly diversified” across more than 20 lines of businesses.