IDFC First Bank Limited (IDFCFIRSTB) Q4 2026 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to IDFC First Bank Q4 and F526 only conference call. As a reminder, all participant line will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation conclude. Should you need assistance during the conference call, please signal an operator by pressing star when zero on your touchtone phone. Please note that this conference is being recorded. I now hand the contents over to Mr. Saprashi Babri, Head of Investigation and ESG. Thank you and over to you soon.

Thanks, Danish. Thanks a lot for the call, and thanks, everyone, for joining the call. We have today with us Vaidya, our Indian CEO, and Sudhanshu, our CFO. So, we'll start the call with a brief quote about the financials for the period ending, 31st March, 2026, by Sudhanshu. With that, we'll have some work from Vaidya, and then we can open the call for the participants, for the questions. Okay? So, now I'll hand over the call to Sadanshu. Good evening, everyone.

Thank you for participating on Saturday. What I will do is I will quickly outline some key financial numbers for the quarter. My sequence would be to start with assets, then I will talk about liabilities, and then asset quality, and finally some numbers around profitability and capital. So let me go first with loans and advances. We saw a healthy growth in loans and advances including credit subsidies during the quarter. It has grown by 20% on a wire-wide basis and it has now reached about 2.9 lakh crores. We saw a healthy traction across mortgages, vehicle loans, consumer loans. Wholesale loans, business banking loans. Collectively, these segments accounted for almost about 87% of the total growth. MSI, we all have been talking. So, there, the good part is, after many quarters, we have seen that the decline has got arrested. MSI book is about Rs. 6,662 crores at March 26. And now, 89% of the book is covered through CGSMU. We saw also an increase in MFI loan reimbursements that was higher by almost 27% on a sequential basis, and even into the next year BC MFI book now, again starting contributing to the overall growth and payment of the bank. Another, I think, milestone I would want to call out is credit cards have now crossed 4.5 million during the quarter, and that book has grown strongly at about 21% on a bio-wide basis. On wealth management side, AEO continues to grow at a steady pace. It has increased by about 23% to about Rs.57,000 crores. Now, I have to call out a few numbers on the deposit side. We saw an increase in total deposits by about 16.8% on a YOY basis to Rs. 2.94 lakh crores. If I begin that, if I talk of customer deposits, then that stood at about 2,84,000 crores, and there the growth was about 17%. The growth was a modest of 1% during the quarter, but that is on account of various factors which played out during the quarter. If I have to call out about two sources access, we did reduce our interest on saving accounts in certain buckets. There was also an impact of the one-off fraud incidents which occurred during the quarter. There was also a tight liquidity which prevailed through the quarter. There was also advanced tax outflows and also, of course, the West Asia crisis. This all, I think, in conjunction had some impact on the deposit flows. Having said that, I want to again state that At the start of Q1, we are seeing strong traction in deposit growth, and hence we feel that we will have a normalized growth or a better growth going forward. If I talk about the CASA ratio, the CASA ratio was at 49.8%, which itself is quite strong for the water. On an EOP basis, we saw an outflow of about 3,700 crores for some factors which I just mentioned before, but on an average basis, CASA ratio increased from 50.0% in the previous quarter to 50.4%. Very quickly, if I move to the asset quality, we, I think, had a good set of numbers across various parameters. To start with, the gross NPA ratio of the bank improved by 8 basis points from 1.69% to 1.61%. Similarly, the net NPA ratio of the bank improved from 0.53% to 0.48% in the current quarter. If I talk of the retail, rural, and the MSME segment, here also the gross NPA ratio improved by 8 basis points to 1.47%. Similarly, net NPA improved by 7 basis points to 0.56%. Then, if I talk about gross lippages, here the decline has been about 15% on a QOQ basis, and if you look at net lippages, they have declined by about 27% on a sequential basis. Even for MSI flippages that came down to, I would say, sub-100 crores, it was in 96 crores, from Rs. 156 crores in the previous quarter. The gross flippage ratio, ex-MSI for the quarter, was lower with 49 basis points at 2.6%. Moving on, if I talk about collection efficiency, that for early buckets that was quite strong, X of MFI at 99.6%, previous quarter this was 99.5%. For MFI, we saw considerable improvement, collection efficiency improved from 99.4% to 99.7%. This is now almost, I think, the pre-crisis levels, what we used to see. As a result of all of this, the SMA 1 and 2 across the retail, rural, and MSMA portfolio have improved by 10 basis points from 0.88% to 0.78%. We have given far more detail in the presentation, which kind of highlights that we have seen a stable to improving trend across all the key products. In Microfinance portfolio itself, the SMA came down by 70 basis points and it stood at 0.79%. Now, if I move on to the profitability. For the quarter, we have reported profit after tax of Rs 319 crores, which includes certain one-time items, which we have called out in the presentation. Let me first tell what are few of these one-time items, which I meant. One is we have taken an upfront impact of the fraud incident which has happened in Q4. And at that, we have paid claims of about 646 crores of principle. And on a post tax basis, that impact is about 480 crores. If I just gross up for the fraud impact, then the tax for the quarter would be about 800 crores. However, to further add, we had two more impacts which we are saying are one time or not on a core basis. One is we had a trading loss of about Rs.159 crores on a pre-tax basis based on a post-tax transfer of about Rs.118 crores. The loss here was largely because of the widening of yield which we saw. During the current quarter, like for instance, the 5-year defects widened by about 40 basis points, the 10-year defects also widened by about 32 basis points, and so on. So, while for the full year, if you see, the Treasury gains have been quite strong, this quarter, of course, we ended up having some loss. We also took a small loss on account of guidelines which came around the NOP policy. The another one thing which I want to call out, which is in fact a positive to the P&L, is we got some income tax order, which gave us a tax refund of about Rs. 173 crores. And so that has contributed to the positive side of the P&L. So if we take into account all these aspects, which is the fraud incidence, which is the treasury income or the loss which we posted, and third is this gain on income tax, then if we exclude all these three, then the normalized profit after tax was about Rs. 746 crores. This is the 319 crores which we have reported taking both impacts. This 746 crores translates to about a 145% increase in impact growth on a YOY basis. For the full year, taking into account all the impacts, which includes the fraud incident, the reported fact is Rs.166 crores, and if it adjusts for the fraud incident, then on a post-act basis, This went up by 39% to Rs. 2,119 crores. We saw an improvement across all operating measures, like for example, NI growth further improved during the quarter to 15.7% on a wire-wise basis. This was about 12% in the previous quarter, and you would have noted that that trend saw last night many quarters where this has started inching up. We had guided the market for a name of 5.85% for Q4, but happy to say that we have come with a name of 5.93% on an AUM basis. This, of course, includes some benefit because of a day convention, largely because February has lesser number of days, and also because we took some cautious approach on investments, and we brought down the average investment book, which also gave some lift. Name for the full year was at 5.75% and that is expected to be stable into the next year. Fee and other income for the quarter again grew strongly by 21.3% compared to 15.5% in Q3. Trading gains I already spoke about that there was a loss of about 159 crores. OPEX for the quarter stood at Rs. 6 to 49 crores. This includes the impact of the fraud incident of Rs. 646 crores on the principal side. If we adjust for this, then the OPEX for the quarter were Rs. 5,603 crores, which was a modest increase of 0.3% sequentially and about 12.3% on a bio-wide basis. For the full year, The optics growth was at 12.3% if we exclude the fraud incident. Moving on to provisions, this has reduced Q&Q by 18% from Rs. 1398 crores to Rs. 1143 crores. Overall credit cost for the quarter came at 1.60%, which is an improvement about 42 basis points from the previous quarter. Excluding microfinance, the credit cost for the overall loan book was at 1.61% in the quarter and roughly 38 bps better than Q3. What this has meant is for the full year, the credit cost has come at 213 basis points. We had guided the market for 2.10%, but another data point to note here is that we have not fully utilized the contingency provision on MSI. After usage of Rs.35 crores in the current quarter, we are carrying forward Rs.130 crores into the next year. If we were to adjust all of it, including that Rs.130 crores, then the credit cost would have been 2.08% instead of 2.13%, which are the recorded numbers. I'll quickly talk about my last section, which is on capital adequacy and liquidity. The capital adequacy ratio is at 15.60%, with CET1 ratio at 13.73%. This has been calculated after considering dividend of 0.25 rupees per share. Of course, this is subject to approval of the shareholders. Average LCI deposits, we have maintained at 114% for the quarter. As you would have noted that we generally maintain this along the trajectory of 114 to 115%. With this, I have broadly outlined the key financial numbers. Maybe I will refer it to Glejya for his opening comments.

Good evening, everybody. First of all, very happy to speak to all of you this Saturday evening. In this presentation, this time, we have actually shared with you the broad strategy of the bank, which becomes important, which will be the strategy transfer to the numbers. So, if you see the, you know, page 9, the first opening slide, we have actually shared with you that, you know, initially this bank's strategy was to borrow money at maybe 12-13%, and then that maybe 20-22%. Now, that is a very unique specialization the bank built over a long period of time. It's like a few years we've been, you know, we've been in that business. And we have developed a specialization in terms of. Within that, we have segments to go after what is the credit performance of each micro-segment within segments. For example, we don't say MSME, it's too blunt a term. For example, we have a defined program for salons, for chemists, and so on and so forth, and Kirana stores and all that. So, that is a unique model built by the bank, and that, you know, the lending is anywhere about maybe 20 to 22 percent, and that credit cost could be 4 or 5 percent. You've come up with a curve, you know, that is where we started. But over a period of time, of course, our costs have once came down, NBUS itself came down to about maybe 9.5%. And then we started, you know, from, and then we started lending to more, you know, products with medium yield, medium credit cost. We will lend about, let me say, 13-14% and credit cost is 2-3%. Now, over time, of course, now we are a bank. Our cost of funds have further come down to 60%. So, we are now able to give prime home loan, prime car loan, and prime loanary property, prime business banking. So, the transition of the bank has moved from the first category I talked about, lending at high yield and high credit cost, to medium yield, medium credit cost, and now low yield credit cost. But the important thing is that the bank has not let go of the original capabilities. It's very important because it's been honed and built over 15 years. We have no intention of letting go of that. And that is one of the reasons why our yield of the book at the bank level is 13% plus. That includes even corporate banking, 13% plus. But you will be surprised to know that the credit cost of the book is only 2%. In fact, you know, I don't exactly remember as soon as she called out the number of fourth quarter of this year or not, it's come down to below 2%. So, in fact, if you've taken a five-year through the period, like 22, 23, 24, 25, 26, or maybe a block of five years, I think one year prior to that, you'll find that credit cost of the bank is only 1.95. That includes COVID, that includes microfinance, everything. So, there's numbers, and we say that we'll keep a credit cost as a 2%. It's not academic. We have been delivering it for the last five years. Of course, last year was higher because of microfinance, but that's, you know, that is already talked about enough earlier. So, the point is that our ability to have a book that yields 13% plus and having credit cost less than 2, which gives a risk and yield of 11% plus, is a very unique specialization. So, we, as far as we are concerned, by the way, you have to also add 2% as fee income. So, you can see how profitable that business is. So, what the bank has been doing for the last seven years, or five years, is that using this business, which makes just a lot of money, and then using it to invest in the deposit side parts of the bank, which is the technology, the people, the branches, the ATMs, many products on the corporate banking side, like cash management, products like Fastag, wealth management, NRA businesses, Let me say, even on the lending side, Our product source is not entirely complete. In this sense, we're still building a rural banking business because we started as a DFI and we did not have any priority sector capability in this bank. For the last seven years, we've been building that, and as you know, 40% of the book leads to priority sector. We're building all that. It's a new bank. We're going to build all that. So the point I'm trying to list is just leave the clue that the lending machine makes all the money. The deposit side money, as of today, is still off making, but it will come to profitability. So, the other thing is that, so therefore, we believe that the bank is coming along very, very, very strong. Most of you will probably add it all up and say, hey, guys, Vadya, end of the day, bank is making return assets only 0.5%. That's true. It's only 0.5. But 0.5 is not 0.5. 0.5 is something is making 1% plus, which is the asset side, and the lending side is, the deposit side is taking away 0.5%. So the day you properly sit and disaggregate this and then understand that the deposit side is not going to make a loss forever. It's a time. It takes 10 years to build a deposit-fired of a bank to scale. So you think you would maybe figure four or five. You give that amount of time, and then that deposit-fired loss will become zero. After, by the time, it will keep compounding at 20% plus, is our opinion, and profit should compound faster than that. So you can see where the path of the bank will head. So, honestly, I feel that the bank is perfectly on track. It's coming along very nicely. This microfinance incident, you know, of course, disturbed the optics of the trajectory of the bank. But, you know, this quarter also, we feel very good about the results, but for the incident that happened, but that we factored in the quarter's results. But you will see, for most of you who will observe the results, quarter two, quarter three, quarter four, you will get to see that the trajectory is back strong in this bank. That's our broad belief. You can see that it plays out. Now, the other thing about the bank is that we've been consistent with one story. You know, we started 94 crores in 2010. Today it's 2 crores. 2.32 lakh crores straight in 15 years straight. We've got, it's consistent with one business model, which is the model we use, you know, the ending side, 2.32. Well, I don't see any doubt why 3.2 should not become 5 lakh crores, should not become 10 lakh crores. It's a well-set machine by now. We only have to get the deposit side right, and once you get that right, then the machine will move. And the good thing is also the corporate banking side, frankly, the bank is doing well now, and, you know, after the initial phase, we slowed down the book. Now we started growing it again, not slow down. Actually, we de-grew the book, to be fair. We brought it on to 68,000 crores to banks, to 36,000 crores. We de-grew it by 22,000 crores. We took out all the project financing infrastructure loans. But now all that is done. There's no more reform to be done there. It's on a growth path. And that will grow as well. And, you know, we have found our own niche. The last seven years, no meaningful credit loss, in fact, if anything at all. So we are quite happy with the way that book is coming along. Now, the overall loan book of the bank is not just about 2.9 like crore, or 3 like crore, I think it's about 2.9 like crore, and that story is also playing itself really quite well, quite diversified across 25 lines of businesses, so really no concern there. The, on the, on the deposit side, if you notice the deposit growth of this quarter was flat, but, but really the, it's kind of, you know, mixed up with three or four signals that came together, like, you know, we dropped the rates, the incident happened. It's hard to pick what, what affected what. But in the end, I just want to say that when this incident happened. Not that we want it to happen to us. We do want to make sure this never happens again to us. But I can just tell you that the positive of this is that the bank has also happened to identify the specific issues, has already implemented at very quick pace the necessary system changes to be done for fixing those issues so that they don't happen again. We can, you know, we kick the tires around and figure out any other part of the issue, for example, even retail customers, if there is no issue also, they went and tightened some extra norms. So, we have done those things. So, maybe these kind of tightening and strictures we have done probably, not probably, will certainly do us good in the longer run. Now, and therefore, when we grow the deposit base, which is currently touching like 2.9 lakh crores, when it goes to, you know, 5 lakh crores, 6 lakh crores, 10 lakh crores, we will feel that it will come on even stronger guardrails, and we just look forward to that. Now, on the, in fact, I remember, in, you know, in 21-22, that time also we dropped rates once. And the first time you drop the rates from 7%. So for one year, there was a flight, you know, it was a flat year. It was a flat year in some of the deposits. But then it starts going again. Like that, this quarter was flat. It will come back. We feel quite confident of that. I don't want to finally say that these kind of goodwill we got during this crisis, you know, there was just so much of bad news overnight in a flash across, you know, social media channels and YouTubers and Twitter and all over the place. But really something amazing, I must point out all of you, for all the, you know, for all that happened, as investors, we should really take note of this, that, you know, there's like 7 to 8 million customers leaving deposits with us. We should really, in fact, we are also quite, let me say, Happy to note or pleased to note that money did not leave the bank. You know, some marginal customers in the very high ticket size who are with high interest rates, some of them left, and frankly, when you drop the rate from 7 to 6.5, people with high interest rates were expected to leave, or who had come to us for high interest rates were expected to leave, but barring that, you know, we got, like, thousands of emails. If you go and see LinkedIn and see, you know, either see my LinkedIn account or you go and see maybe IDC Bank's LinkedIn account, you will see the number of people who have posted their videos and reports saying that, look, we trust this bank and we support this bank. I really think that some good brand the bank has built, could trust the bank has built in people's, you know, minds and hearts. So I'm ready to help us. We just want to take this opportunity of the investor call to say very, very, very, you know, very sincerely to say thank you to every person who helped us and said some good motivating words to our employees. And it kept us happy and going. And of course, It is a culture of the bank to move very fast, he moved very, very quick, you know, this incident happened on Saturday, afternoon is when I happened to be in Delhi and someone called me and told me that, you know, this incident is... This and this is quite big. You know, at night we reported the exchange straight on. Monday morning we took the investor call. Monday afternoon we called up the other party and said they're going to pay you right now. And then Monday night we paid them. Tuesday morning we met them in person. Tuesday night we, Tuesday afternoon we called up the, you know, the newspapers and said we want a front page ad. That day we prepared the ad. Next morning it was out. It just moved like blinding fast. With very quick, decisive way, saying that it's customer's money, customer should get it. That's the end of the matter. We did not apply any of the principles to it. We did not think of litigation. We didn't think of anything. We didn't even think that your employees were also involved. It was your responsibility, my responsibility. We didn't think anything. We just said, customer's money, payback. And I think that our DNA to move pro-customer to be decisive and just move, and I think it did help us somewhere along the way, you know, customers did trust us, and we want to thank them for that, and I also want to, again, I want to close that point by saying I want to thank everybody for that, and all of you helped us in that very crucial moment, and there are many. I'm happy to share the cost of funds have come down to 6%. In the last one year, cost of funds have come down by over 50 basis points, I'm sure. 50 basis points. And we are now down to 6%. And honestly, I don't think any of you would have guessed when we started this bank and we took over this bank in 2019 at 7.8% that we're going to cut it down by 180 basis points cost of funds and bring it down to the line of our peer banks. Iva, at that time you were paying 150 pesos points over mid-tier of your bank. 150 pesos points. I just want to say that the deposit is coming well for the bank. As I always say, I don't tell the market whether I will increase it, I will reduce it. I just say that it's unlikely we will touch the rates, but still I keep all my offices open depending on what the market conditions are. But chances are the rates will probably be somewhere in the zone as the year progresses. It could be 10 business points up also, I can't tell for sure. It depends how the market plays out. Now, let me just say that on the asset quality front, I'm happy to share. If you notice, all of you may remember that every single quarter form now, like, you know, Let me say, five, seven years, and particularly last two years, when the microfinance crisis was raising, and credit cost numbers were going up, we kept insisting and sharing with you product by product, vintage by vintage, SMA, one and two, SMA, you know, NPA, credit costs, everything. So we share everything with you, and we always maintain to you that except microfinance, this book is super clean. I am happy to say that it has turned out to be so, because when the microfinance crisis is gone, suddenly a credit score has come down to 1.6% to 1.7% of the average loan book, which is probably the lowest we have seen in a long, long time. And anyway, gross, and pay is always less, and net income is always low. So, I'm just happy to share that we give a lot of disclosure. If you notice, we give the collection efficiency of the overall book, excluding microfinance, we give it including microfinance, then we also show the, you know, the SMA1 and SMA2 for the whole book, we show the, you know, the gross NPA and net NPA for the whole book, and frankly, every one of the numbers are stable. So, really, I can tell you as of now, the last, it's been seven years now, as a bank avatar, and it's been eight years before that as capital source avatar, our gross NPA, net NPA credit cost is just fine. It's behaving very stable, no issue at all. Then microfinance came, microfinance went, that did cause a struggle, but that is, that they have caught it out openly all the time. And let me share with you, there was never any acquisition against a bank that we ever touched the books, we ever greened anything, we just paid clean. If it was a delinquency, we took it, and that was the end of the matter, but that's only for microfinance. So, anyway, that stands for it. And on the corporate side, of course, I'm happy to tell you that everything is cleaned out. So, as I speak to you, you know, I just... I've stumbled upon this page where we talked about credit costs. I'm happy to tell you that credit costs of a full year is 2.13 for FY26, which is basically 1.5% of the average assets. But that 2.13 is broken up as follows. It's the 2.69% for Q1FI26, 2.24% for Q1FI26. 2.05 for Q3, and 1.63 for Q4. So you can see that our credit scores are coming down. We are rather happy about that. And that actually gave us a spread. And frankly, the beginning of the quarter we knew was going to be low. So even when the crisis came, if you remember, I came out to the press and I gave public interviews, including to the leading channels like CNBC. And I came and said that we expect this to be a profitable quarter because we knew that credit scores of the quarter were going to be quite low because the book is turning out so well. So, that's that. I'm happy to share that overall the bank is doing well. We're expecting growth from now on. We're expecting deposit to grow, loans to grow, you know, and Q1, you know, expects the bank to do a report of reasonably good numbers. And back to the opening point that I started, I must say that please always book, see this book, you know, all of you are investors. You might still look, why are they going to just rotate up and say they have one number? That's what they're ROE, what somebody else's ROE, and you want to compare. Well, you could do that, but I can tell you that a bank is running for 30 years or 40 years, you know, for them everything is amortized, and everything is built 15-20 years ago, and they're only running on marginal costing. Our bank is not running on marginal costing, our bank is running on full costing. So, and that's a big difference. So, therefore, when you look at this bank, think clearly that this bank is borrowing money at 6%, is lending money at 13%, so that gives a spread of 5%, and they have a credit cost on top of only 2%, and then they see for 2%. You can see for yourself it's profitable. So, just split up the two, see assets of assets, it's a going machine. You see, liabilities are something that is loss-making. I don't deny. Credit cost is loss-making, I don't deny. Gold loss is loss-making, I don't deny. New book is, prime book is lost making, I don't deny. These are things which are building for the future. And some of the rural book we are also building is also lost making, I don't deny. This is all talk of life, but frankly, anybody who's got to build a bank, someday in life, someone has to sit and build these things. And eventually, when these all become profitable at scale, then you will see the true bloom of the bank profitability come about. And you watch out. You just watch 27, watch 28, watch 29. Many of you have doubts today. I'm 100% sure your doubts will blow away. It's just a matter of time. So, thanks so much, everybody, and we'll open to questions.

Manus, please open the phone for questions.

Sure. Thank you so much, sir. Ladies and gentlemen, we will now begin with the question and answer session. Anyone who wishes to ask a question may press star and one on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are request to use handset while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes from the line of Param Subramanian from Investe. Please go ahead.

Yeah, hi, sir. Thanks for taking my question, and congrats on a resilient performance in what would have been a tough quarter. Sir, if you could comment a bit about the monthly... Deposit accretion, since it's been two months since, you know, we had that event, and of course, you know, we've also cut down our star rates. So, how are we looking in terms of our monthly deposit accretion, customer additions, etc.? And are we back to a normal run rate, and do you think we will get back to our normal growth pace from, say, first half of next year on deposit? Yeah.

See, we have generally seen that when people go through this kind of crisis, it takes about a year or so for things to stabilize. You might have seen it elsewhere. But we are quite confident that this matter is behind us. Q1, FY27 itself, you will see a strong growth in the bank. The year that went by, we already discussed it's been flat, but flat also is good news, you know, for the quarter that went by, for, you know, like I said, we also cut the rates. But you should see, I mean, we've already seen last year, last quarter, last month, you know, that's quite amazing. I've already talked to Goodwill, of customers to us, and I don't know where we're getting such Goodwill from, but thanks to everybody. We, if you see the, if you see the last year also, last month also, in the month of March, when crisis only, when the news has broken out, you know, Feb and the news broke, so all of March the news was hot. Number of accounts opened was as high as the previous month of February, was equal to January. So, new accounts opening is coming perfectly strong, and, you know, once the customers who took over the money because of the high interest rates, you know, when you cut the rates, this quote onwards, you should see growth, right now itself.

So, sir, we should get back to our, say, normal 20%, 5%, yeah, 5%, you know, 5%, yeah, 5% QOQ, that kind of quote, yeah.

Okay, sir.

Fair enough. So, on LCR, 114% makes a bit close. So, from next year onward, we will be looking at the max loan and deposit growth.

No, no. We always maintain the comfortability of that kind of numbers because, you know, LCR of 100 is a conservative number. You know, on top of it, we don't need to keep too much of a margin on top of it. It's a good number. It's quite stable. And finally, during the crisis, it stayed strong.

Yeah. Sir, and how to think about margins going into next year? There is an uptick going into this quarter, but this is largely steady at this level.

Yeah, thanks for the question. So, margin for the full year is at 5.75%, and going into the next year also, we expect it to be stable around these levels.

Okay, 5.93 is what we reported this quarter.

No, no, for the full year, I said, was 5.75%. I also mentioned earlier that Q4 also had certain impact because of technical reasons, like I spoke about the say, convention logic, and so on. But for the full year, the margin was a 5.75%, and into the next year, we feel we will probably be able to hold around those levels.

Okay, thanks for that. And on OPEX, we are still holding on to what we've talked about, 30-14% for next year?

Yeah, that stays in terms of guidance. But note that Q1 could be a little higher. And then Q2, Q3 onwards, it should have come down. So for the full year is that, but Q1 could be a bit higher because of a couple of reasons.

Because we have put out some branches, we would have noted about 80 branches in Q4. Q1 also has impact of the increments and so on. So these are some of those factors which could play out.

So when you see Q1, you see compared to Q1 of last year, you will see a little higher than 13, 14 that we are talking about. But by Q2, Q3, Q4 should come down. And by year end, it should be land the same way we landed this year.

Got it. Very useful. So, that's why I think I already mentioned initially that, you know, the profit for the quarter adjusted for the treasury loss and the fraud impact was 750 crore. That comes to about 75 basis point of ROA in this quarter. Again, I want to check with, you know, is there any, say, timeline one should look at for, say, broadly reaching 1% ROA? Because clearly, of course, ROA is improving.

Definitely the core performance is improving if, as you rightly said, if we isolate some of these one-time impacts within Q4. So I do want to sort of put out the number as such. We all know, right, this West Asia crisis is still going on. There are still some moving parts, right? So I would not want to guide on a particular number at the moment, but definitely from an operational parameter, we would have noted that the performance is improving quarter and quarter. And even on the credit cost, we feel that the credit cost would be lower than the current year.

Yeah, so what Redcore should we broadly work with? Yeah, that's my last question. Thank you all. Go for next question.

Yeah, so I feel that it could be in the range of 170 to 180 basis points. We may also, this includes some benefit which we may get because of the CGSV cover which we have taken for MFI. Perfect.

Very useful. Thank you so much. Congratulations once again on the call. Thank you very much.

Thank you so much. Our next question comes from the line of Akshay Jain from Autonomous. Please go ahead.

Thank you, sir, for the opportunity. I also have two questions. So, one on active quality. So, what is dragging the strength this quarter? So, while you have utilized contingent provisions, your write-offs are significantly lower. Any other factor you would like to address? And, again, on write-offs, they are down to, like, around 1200 levels. Like, what is the sustainability of these levels going well? And related question on actuality, so it's been like almost two months since the war started, and we keep getting views on, you know, supply chain, disruptions, raw material costs, and these days. So while Mars was still fine, how are you seeing trends playing in April, especially on the MSNU front? And how are you thinking, you know, on growth and activity in the light of these disruptions. And maybe the last, yeah. And maybe the last question on the R8. So, you have changed the R8 this week. So, can you let us know the impact on, you know, your cost of SAR due to this change?

You meant the recent change?

Yeah, the recent change. 24 years.

Yeah, that change would not translate over too much from the current levels. Maybe a few basis points. Moving on to asset quality, in this quarter, of course, many things are played out. I have told that SMA 1 and 2 numbers improved back in business points. Then the slippages, which also led to a lower translation into slippages. Of course, MFI giant has been coming down. The slippages have been coming down there. The collection efficiency was quite strong in Q4, which typically happens every year, the collection comes in quite strongly at the end of the year for some reason, I think across the banking system. So all of these trends have been quite healthy. Finally, all of this has to translate into a credit cost, which I just answered to the previous speaker. So NetNet, we feel that the asset quality rents would be quite stable. Now, let's talk about the crisis, the West Asia crisis which is currently going on. What we have done is we have undertaken a comprehensive review of our portfolio to assess exposure to potentially impact-less sectors including demand disruption, fuel-related risk, and supply chain challenges, and so on. We have clearly identified some sectors where we could slightly be more conservative. We don't intend to stop anything, but we are adopting a cautious approach. Accordingly, the immediate impact on the overall portfolio is expected to remain limited at current levels. However, if there is any escalation, which could lead to further material supply disruptions, we will continue to monitor. So, we need to see how this plays out.

Thank you, sir. And just a follow-up on the margin points. So, even if I adjust your margin for the fee for seasonality, it is still around 5.85 odd levels. So, why are you giving the guidance of, you know, 5.85 for the full year? Why should margins come down from these years?

We continue to grow certain portions of the portfolio at a faster pace, right? Like you have noted wholesale ranking book is growing at a fast pace, right? The business ranking is growing. So some of these are diluted from a margin point of view, but we ultimately want to see what is the contribution to profitability. So even a 5.75% for that matter is quite a healthy number, right? It's one of the highest in the banking system. So you can assume that it's quite a range amount in that sense.

And let's do so. Thank you, sir. Thank you for the question.

Thank you. Our next question comes from the line of Piran Engineer from CLSA. Please go ahead.

Yeah. Hi, team. Congrats on the quarter. A couple of my questions have been asked and answered, but need some clarification. Firstly, this treasury impacts the loss of 160 crores. Now, if I adjust for the stake sale in that stress power company, we actually made a profit of 115 crores. Is that correct?

No, that's not the way. In fact, in the investor presentation, we have clarified that we have sold certain equity in a particular group that gave us a loss of 274 crores. But at the same time, we were holding provision against that. So, while when we have reported the annual financials, we have reported a 274 crores loss on top of 1.59 crores in treasury line item, we have also reported a lower provision. However, for right comparison, what we have done in the investor presentation is we have grossed up this impact. So, the actual loss for treasury for the quarter is about 159 crores. And this is an old case, legacy case, where I said that this was fully provided. So, this has no impact on the PIL. So, for a right comparison, we did this.

So, then the real credit cost for the quarter is 870 crores or 870 plus is 270?

Plus this 270 crores. And that's how when we have quoted credit cost numbers, it has been baked in. So, this case was, as I said, it was a much older case, pre-emerger, due to the pre-emerger time, and this was fully provided. This was, in fact, one of the infra-exposure which we had.

Okay, okay. Okay, fair enough. I think I might reach out.

Did you answer the question, or I will be happy to further clarify.

I'll get back to it separately. I was a bit confused on my numbers, but this clarifies it.

If you refer to the investor presentation, you'll get the clarity on that on the panel first.

Sure, fair enough. Secondly, is there any further ED repricing left, or are we done with most of it?

We may get some residual impact in Q1, but it's largely done.

Got it. And just thirdly, in terms of CASA ratio, now we cut SAR rates last quarter. We've not seen any impact on CASA. In fact, our CASA ratio has improved 14 bits. Do we take this as a more steady state CASA number? Like CASA ratio number?

We'll wait and see because, you know, even term deposits are also coming strong. So, we will wait and see because the rate cut is quite heavy. It's a bit wrong. Just three months.

So, Got it, got it. Okay, yeah, that's it from my end. Thanks and all the best. Yeah, thank you.

Thank you. Our next question comes from the line of Jayant Karuti from Access Capital. Please go ahead.

Thank you for the opportunity. My question is also similar to, I think, what Param was asking on the ROA for the next year. If I understand correctly what these min levels and at one point it edit costs, At 5.7 findings, it adds up to maybe around 75 tickets, correct me if I'm wrong, which means we're expecting almost 20 basis points of operating leverage translating to our way through the next year. But also simultaneously, the jaw is slightly slower, which means that our growth is now going to be around 20, not 22 or 21. So, even if I keep stretching this beyond one or two years, if 20% is the growth range, are these numbers sounding correct or am I off by anything, which means that we'll have to extract 20-25 bits on operating leverage this year, Sudhansu.

So, definitely operating leverage improves into the next year. And as we would have mentioned, I think, in the last call also, next year, we expect the top line to be much better than what we saw in this year. Like this year, top line grew by just 11.2%. And now if you see Q4, the NI grew by about 16%, 3 has grown at 21%. So, into the next year, we feel that now the MFI drag is over. The MFI book is expected to grow and positively contribute to the top line. So, on the top line itself, I see it growing at about 18 to 18.5%. And OPEX, as we have guided for 13 to 14%, still the jaw would sizably look better, right? So, which definitely contributes to the ROA. On top of it, I also sort of elucidate on that even credit cost is expected to come down from 213 basis points in this year to about 170 to 180 basis points. So all of this in conjunction is expected to positively contribute to the ROA. So it's across all the parameters, I would say, we are expecting some improvement.

One important insight which many of you have missed actually is how the ROA of the asset side is and liability side is. Okay, I made this point in my earlier talk, but I'll just... Now, by our own internal estimates, we feel that the ROI of the lending business for the next year will look quite strong. As Sudhanshu mentioned, the reason we expect rate cost to be lower than this year, even in absolute terms, and, you know, to grow naturally, not in a percentage number, in absolute terms, in the NII, sorry, NII to grow, and you see how it will come. No. Basically, we expect the profitability of the lending business to further improvements here. When we do our internal estimates, we look like it will be like 1.5-1.6% of the loans. That is the ROI of the lending business to be somewhere in the zone like 1.5-1.6% of the loans. Now, but of course, the liability side will still be a drive. But the good news is that the loan side is like rock solid. Even if you make 1.5% at this stage of the bank itself of loans, it's pretty good. And obviously in the next 24 years after that, we'll still get operating leverage. So we should just watch out the liability drag to go away. And liability drag for information has come down to 1% now. You know, last year was how much I'm sure. 1.2. So, 1.2 has come down to 1, and prior year was even higher. The trend line was clean, clear. So, that, you know, that 1% should become like 0.8, 0.2, 0.8, 0.6, 0.2, 0.2. That direction should play out properly. I mean, we see no doubt in the liability drag coming down to zero in the next few years. It is just playing out exactly what to plan.

Thank you.

Thank you for that. Actually, I was comparing with the 4Q numbers. 4Q credit cost and 4Q NIMS are better than what we are guiding for next full year credit cost and next full year NIMS, right?

For Q, credit cost is at 1.60%, right? Our guidance is slightly higher for the full year into the next year on credit cost.

And 4Q is also higher than what you're guiding for the next year for Q.

No, no, Q4 is higher, but I said for the full year it's at 5.75%, and next year the name should stay put broadly. Right? Two-four, NIM is known the right comparison because of the day convention and some of these things. No, no, of course. I was just comparing two. So, if you assume NIM broadly stays stable, fee, he could see some improvement because the traction has been there in terms of fee to average total assets. Of course, the larger break is expected to come out from the operating leverage itself, and then on top of it, the credit cost improvement. So, all of this...

I think you have not answered a specific question. Even the prior way of the sentiment asked, why are you currently running, even existing for this quarter? You'd like 280 or something for this quarter?

Which one?

Sorry, 580. You're reporting fine. 580.

Yeah, I'm running for 575.

Exactly. I need to explain why. That's basically because you're coming to a little more safer segment. I did not. Okay.

Maybe I'll take this off-line, Sudanshu, but just sort of to cover it, you guys are still confident on hitting 1% ROA by the end of this year. Is that a takeaway we can work with?

As I said, James, I don't want to guide to a particular number currently, because there is a crisis. There are a few moving parts, right? But definitely the operating trajectory is improving quarter-on-quarter, and we expect that too. That Q4 trend is broadly to continue into the next year in terms of an improvement in top 9. Maybe in a kissing distance.

We'll get to the kissing distance. But I can tell you that, you know, many people asked us about this ROA of 1% and many have said that, look, it's a... This is a benchmark we must cross, and we must. But I can only say that our bank will not stop at one. Just watch it play out, because from there on also, the full juices have to be taken out, I mean, the full values have to come out, because of particular, this will improve the next four, five years at a stretch now. So it will not stop at one, the representative, whenever it comes.

Oh, definitely. One last question to you on the capital. Given that our growth trajectory, I mean, clearly the liability side is not going to stop with this event and we are going to start growing again. So, how does the capital adequacy look like and you think you will need more capital by the end of this year, starting next year?

Yes, yes, we definitely think so and we will reiterate it.

Great. All the bents and congratulations for holding up during a very tough quarter. Thank you very much.

Thank you. Thank you.

Thank you. Our next question comes from the line of Ankit Bihani from Nomura Holdings. Please go ahead.

Yeah, thank you for the opportunity and congrats on the quarter. So most of my questions have been answered. I just wanted to ask, how do you see, you know, deposit competition playing out going ahead? So while we did cut our star rates at the start of the fourth quarter, but we have raised our TD rates also round about by 25 odd bits, right?

So do we see the competition going ahead becoming more intense given that even PSU banks, even the large private banks? We'll have to fight for deposits, so we can sustain the credit growth momentum.

Maybe I'll ask Vaidya to answer that question.

I think, I said that before, so I'll not take much time. I think that our bank has developed a good, you know, technology capabilities, good app, our branches are up, you know, there's a lot of hyper-visualization happening. So, there is a lot of tech involved in basic deposits, which is our, which is a strength for us. So, those strengths, we really believe are, like, you know, they're invisible strengths. You don't see them, because what you see is rates and you see branches. This is a very conventional way of, you know, most people talk that. There is a third factor which we are running behind the scene, which is culture and technology, which are invisibles, and we are strong on those invisibles. So, we think that, you know, Not to worry much, our deposit will grow strong this quarter. This quarter also, this year also, we will be very strong. I can only tell you that our, this month has started off very well, April has started off well, so we are not disturbed.

Thank you.

Thank you. Our next question comes from the line of Jai Mundara from ICICI Securities. Please go ahead.

Hi, good evening, and thanks for taking my question. Sir, first, a small verification. You mentioned that 170-180 credit cost is including the CVSMU recovery, if any. Would you have a number as to how much you are going to claim for this financial year?

We don't want to call out that number. As we noted, we have taken losses on MSI in last one or two years. So, we expect a reasonable recovery to happen on that front in the next year.

Thank you. And secondly, on MFI book now, now this quarter of the book has been slattish, and if I were to maybe include the write-off, then it may have grown. How are you looking at this book incrementally? I mean, would it be, I mean, when do you think it will hit double digit and maybe similar to overall bank, or how are you looking at this book?

So, definitely we want to grow this book. We like this book. It contributes to PSL, comes with a good yield and so on. Now, with the MFIN guidelines coming in, I think some of those guardians have also been put into place. So, and of course, we are adopting a cautious approach on the ground also, how is it, connection efficiency tends to be improved, disbursements are picking up. So, we would certainly, of course, it's coming from a lower base. We would certainly want to grow this by 15 to 20 percent into the next year. So, we will see how sort of the trend sort of spanks out. So, we want to grow this book.

Okay.

And any thoughts on creating ECL transitional provisioning? I mean, so far, the asset quality has been holding up very well. I mean, it has been holding up very well for the last five years. But any thoughts on, we have small 130 pros of continued provisions. But any, I mean, any working, rough working that you can share as to, you know, what could be the transitional provision required at all?

We still await the final guidelines, and this was expected to come in from April 27, but the final guidelines have not yet come, while most of the banks gave comment somewhere in November-December last year. As I had talked about it in my earlier calls, definitely when the final guidance comes, it could mean that we need to pass some more capital on the EPL front itself. On transition, but we may also get some benefit on account of the EIR approach, because today the sourcing OPEX is more than the processing fees. Plus, there are also announcements around the change in the previous risk guidelines, which come in from April 1, 27. There is also guideline available in operational risk. I think taking all of this together, of course, contingent on the guideline itself which comes, we feel that transition capital should be largely Good morning, everyone. Should be largely taken care of. So we'll see how some of these e-fill guidelines itself sort of comes out.

Last question. Was there any impact of this CLM transition, co-lending model, you know, RBI had introduced from January 1st? The broad breakup does not possess anything, but just wanted to check if you had any changes in your IT or the way you partner with partners for co-lending or was it immaterial sort of an event?

I think we don't have, we have a very small book here. In fact, if I recall, we, I think, have this arrangement with only one counterparty, and the number is very insignificant.

Thanks, Sudhanshu, and all the very best.

Thank you.

Thank you so much. Ladies and gentlemen, due to the time constant, that was the last question for today. I would now like to hand the comments over to Mr. Veddinathan for closing comments. Thank you, and over to you, sir.

Thank you. Since we closed shop exactly one hour, let me say that in case, if anybody hasn't laughed, Question to sneak in, we just want to give you the last opportunity. In case, in case, in case, if there's none, I don't want to hold it up.

The answer, we'll take the last question from Mr. Suresh Das from Sundaram Mutual Fund.

Hi, am I audible?

Yes, please.

Yeah, I said just one, I think, data.

Please proceed ahead with your question. Okay, we'll take the next question from Vikas Kasturi from Focus Capital. Please go ahead.

Good morning, sir. I'm also a shareholder of the company and a long-time listener and a first-time speaker here. So please pardon my nervousness. Sir, I just wanted to ask you a question, which I've been wanting to ask for the last few years, maybe. So one is about this, you know, financialization of savings because of which a lot of money is going towards residential funds. And so, in such a scenario, how does the bank plan to continue trading in Gaza? This is my only question, sir.

Thanks, I'll keep it. First of all, Vikas, welcome to talk to any of us in the bank, so feel comfortable. Now, we understand the financial savings and people are moving to investments, you know, that's a well-known theme. We think that, you know, this is a very large market. We are relatively a younger bank. And, uh... One of the earlier questions, we had other bankers that got good capabilities, good digital capabilities, good brand, good culture. Employees are very motivated. You can go to any branch and talk to a star, you get a sense. So there are many things in our favor. Well, no doubt the markets are tight. You know, end of the day, we are part of the system. We are not outside the system. So anything, any broad tightness of industry affects everybody, affects us also. But overall, we are confident with us. I mean, we'll be strong at this front. We have no doubt about that. If you're an individual shareholder, let me tell you that you should assume the bank will grow well on deposits YOY, bank will grow loans YOY, bank has good margin on an incremental basis. You have to only count on one thing. You have to only look out for one thing that our cost income ratio should come down because our liabilities at cost income should come down. Our liabilities at cost income ratio is 145%. It should, that is what it's bringing up overall to 73, 74-ish types, so that will come down, you can take it from me, it will come down 145 to 100 over the next few years, and when that comes down, bank cost will come down, bank cost will come down, bank will go up, things will all play out to plan, it's playing out to plan even now. So that's the thing to watch out for, don't worry too much about the holidays, it's coming well.

Sure, sir. I've been an investor since 2019. Nothing can scare me.

Thank you, Vikram. Really, really grateful you for that kind of confidence in us. We won't let you down.

Yes, sir. Thank you. Wish you all the best.

Thank you on everybody, and thanks to all the investors for participating with this call today, and from Sudanshu.

Thanks, everyone, for joining the call.

Thank you so much, sir. Ladies and gentlemen, on behalf of IDHC First Bank Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines. Thank you.