IDFC First Bank Q4 FY26: Profit up 5%, NPAs fall

The headline numbers from Q4 FY26

IDFC First Bank reported a year-on-year rise in standalone profit for the March 2026 quarter, alongside a sequential improvement in asset quality and lower credit costs. Reported profit after tax (PAT) increased 4.9% YoY to Rs 318.94 crore (Rs 319 crore). The quarter also included one-off impacts, and the bank separately disclosed a higher “normalised” PAT excluding such items.

The numbers mattered because they combined two themes investors track closely for lenders: the trajectory of provisioning and the direction of early warning signals in retail and MSME books. In IDFC First Bank’s case, management reiterated that stress was largely concentrated in the microfinance book, an issue that impacted the wider industry in FY25 and FY26.

Total income rises; normalised profit jumps

Total income increased 7.73% YoY to Rs 12,182.81 crore in Q4 FY26. Reported PAT, however, remained modest relative to operating performance due to one-time items recognised during the quarter.

The bank said normalised profit after tax for Q4 FY26, excluding one-time impact items, rose 48.4% YoY to Rs 746 crore. It also stated that it has fully recognised the financial impact of the “Chandigarh incident” in Q4 FY26, with a post-tax impact of Rs 483 crore, and does not expect further material adjustments.

Tax credit cushions the quarter

A tax credit provided support to reported earnings in Q4 FY26. The bank reported a tax credit of Rs 129.64 crore in the quarter, compared with a tax expense of Rs 132.50 crore in Q3 FY26 and a tax expense of Rs 57.06 crore in Q4 FY25.

This tax movement partly cushioned the impact of one-off charges on the reported bottom line. Even so, the bank’s disclosures show a clear gap between reported and normalised profitability for the quarter.

NII growth stays strong; NIM improves sequentially

Net interest income (NII) rose 15.7% YoY to Rs 5,677 crore in Q4 FY26 from Rs 4,907 crore in the year-ago period. Net interest margin (NIM) stood at 5.93% in Q4 FY26, down 2 basis points YoY but up 18 basis points sequentially.

Core operating profit (excluding trading income) declined 7.8% YoY to Rs 1,492 crore. The bank also reported that the cost of funds improved to 6.00%, down 51 basis points YoY and down 11 basis points QoQ.

Asset quality improves on key ratios

Asset quality metrics improved during the quarter. Gross NPAs were Rs 4,558.52 crore as of March 2026, compared with Rs 4,614.14 crore in December 2025 and Rs 4,433.58 crore a year ago.

The gross NPA ratio declined to 1.61% as on March 2026 from 1.69% as on December 2025 and 1.87% as on March 2025. Net NPA ratio improved to 0.48% from 0.53% in both the previous quarter and the same period last year. SMA 1 and SMA 2 (retail, rural and MSME) also improved to 0.78%, which the bank flagged as better early-stage asset quality trends.

Provisions fall to a two-year low

Provisions and contingencies declined 40.07% YoY to Rs 869.24 crore. The bank said provisions have declined to the lowest level in two years.

Provisions as a percentage of loans fell to 1.63% in Q4 FY26 from 2.05% in Q3 FY26. Provisions as a percentage of total assets declined to 1.18% in Q4 FY26 from 1.45% in Q3 FY26.

The bank also utilised Rs 35 crore of contingency provisions on its microfinance portfolio during the quarter and said it carries forward Rs 130 crore into FY27.

Deposits and advances show steady momentum

On the business front, total customer deposits rose 17.3% YoY to Rs 2,84,453 crore. CASA deposits increased 24.0% YoY to Rs 1,46,650 crore, and the CASA ratio stood at 49.80%.

Advances grew 20.0% YoY to Rs 2,90,278 crore, with 87% of loan growth driven by mortgages, vehicle loans, consumer loans, business banking and wholesale segments. Total customer business increased 18.6% YoY to Rs 5,74,731 crore.

Operationally, the bank said credit cards in force crossed 4.5 million during the quarter. Its wealth management business (private wealth) grew 23% YoY to over Rs 57,000 crore.

Capital position remains above requirements

IDFC First Bank reported a capital adequacy ratio of 15.60% as of March 2026. The bank said it remains comfortably above regulatory requirements.

Commenting on the results, MD and CEO V Vaidyanathan said the asset quality of the bank remains stable and reiterated that performance was steady across businesses except for the microfinance book, which saw industry-wide stress in FY25 and FY26.

Key data table

Market reaction

Shares of IDFC First Bank fell 0.88% to settle at Rs 67.23 on Friday, April 24, 2026. The move came on a results day that highlighted improved asset quality and lower provisions, but also reflected the gap between reported profit and normalised profit due to one-off items.

What investors will track next

The key follow-through for FY27 will be the microfinance portfolio performance and whether the declining provisioning trend sustains after the bank’s stated recognition of the Chandigarh incident impact. Investors will also monitor how deposit momentum and the near-50% CASA ratio translate into funding costs, given the cost of funds improved to 6.00% in Q4 FY26.

Separately, the pace of loan growth across mortgages, vehicle loans, consumer loans, business banking and wholesale segments will remain central to the bank’s operating metrics, alongside any updates on contingency buffers carried into FY27.