IDFC First Bank has reported a 168% year-on-year jump in net profit to Rs 343 crore in the quarter ended March on the back of lower provisions and higher net interest income.

The private sector lender had posted a net profit of Rs 127.81 crore a year ago.

Net interest income (NII) grew 36% YoY to Rs 2,669 crore in Q4 FY22 from Rs 1,960 crore in the earlier year.

Net interest margin improved to 6.27% during the fourth quarter from 5.9% a quarter ago.

“Our core operating profit for Q4 22 has more than doubled (up 106 per cent) to Rs 836 crore as compared to Rs 405 crore in Q4 FY 21. This shows the power of the business model we are building. Our PAT is up 168% year-on-year from Rs 128 crore to Rs 343 crore," IDFC First Bank managing director and CEO V Vaidyanathan said.

Other income, which includes fees and commission, jumped 40% to Rs 841 crore.

Provisions during the quarter fell 36% YoY to Rs 369 crore from Rs 580 crore.

The bank has not utilised the Covid provision during the quarter and has carried Covid provisions of Rs 165 crore as of 31 March 2022.

The bank’s asset quality improved with gross non-performing assets (NPAs), as a percentage of gross advances, declining by 45 basis points to 3.7%. Net NPA ratio fell to 1.53%, declining 33 bps YoY.

Gross and net NPA of retail and commercial finance reduced to 2.63% (a reduction of 138 bps YoY) and 1.15% (reduction of 75 bps YoY), respectively. 

The lender said that one infrastructure loan (Mumbai Toll Road account) which became NPA during Q1 FY22, continued to pay its dues partially and the principal outstanding was reduced by Rs 25 crore during the quarter to Rs 794 crore as of 31 March 2022.

“Gradually the cash flows of this account are likely to regularise, as traffic volumes on the Mumbai road come back to normalcy. While the account is NPA as of now, we expect to collect our dues and expect eventual losses on this account to be not material in due course,” it said.

Deposits rose 13% YoY to Rs 93,214 crore. The bank's CASA (current account savings account) deposits reported a growth of 11% to touch Rs 51,170 crore as of 31 March, from Rs 45,896 crore a year ago. The average CASA ratio for FY22 was 49.88%.

Current account deposits accounted for 18.29% of total CASA as compared to 11.80% by the end of March 2021.

The bank’s loan book grew 13% to reach Rs 1,31,951 crore. The retail and commercial loans grew 26% to touch Rs 95,377 crore. This was primarily driven by growth in home loans, which saw a 52% surge YoY.

Infrastructure financing fell 36% YoY to reach Rs 6,891 crore (reduced to 5.2% of fund assets). All spectrum-related bank guarantees issued by IDFC First Bank have been released, the lender said.

For the full fiscal ended March 2022, the bank’s net profit fell 68% to Rs 145 crore from Rs 452 crore a year ago, due to higher provisioning in the first quarter of FY22 to manage the Covid-19 second wave impact on its assets, IDFC First Bank said.

NII for FY22 grew 32% to Rs 9,706 crore, from Rs 7,380 crore a year ago. Fee and other income grew by 66% to Rs 2,691 crore from Rs 1,622 crore.

"The bank is broadly on track to meet the asset quality and credit cost guidance. Based on the improved portfolio performance indicators, the bank is confident to achieve its credit cost guidance for FY23 at nearly 1.5% on funded assets," it said.

Vaidyanathan said in the retail business, which is one of the key drivers of growth, NPA continues to reduce over the last four quarters.

"Our retail gross NPA sharply reduced from 4.01 per cent in FY21 to 2.63 per cent in FY22, and net NPA reduced from 1.90 per cent to 1.15 per cent. Based on internal analysis, we are comfortably on our way to reduce retail GNPA and NNPA to 2 per cent and less than 1 per cent, respectively, as guided earlier," he added.

For the first three years after merger, IDFC First Bank grew the retail deposits base (3-year CAGR of 72%), and slowed down the loan growth (3-year CAGR of only 6%) to strengthen the foundation. “Now that our CASA is ~50%, we can comfortably grow our loan book between 20- 25% compounded for the next three years. This will give us strong operating leverage and growth and profitability. Our capital adequacy is strong at 16.74%,” Vaidyanathan said.