> ## Content Index > Fetch the complete content index at: https://www.moatmarginresearch.com/llms.txt > Use this file to discover other available public pages before exploring further. # IDFC First Q2: Profit Triples, Margin Slips to 5.58% - URL: https://www.moatmarginresearch.com/idfc-first-q2-profit-fcnr/ - Published: 2026-10-25T03:49:38.000Z - Updated: 2026-10-25T03:49:38.000Z - Description: IDFC First Bank's Q2 FY27 profit rose 196.5% to ₹1,045 crore on lower provisions; its margin fell to 5.58%, which the bank links partly to ₹34,390 crore of FCNR - Author: A K Karthikeyan - Tags: Moat Insights **IDFC First Bank made a profit of ₹1,045 crore in the September quarter, up 196.5% from ₹352 crore a year ago and its second quarter in a row above ₹1,000 crore. Higher interest income and lower provisions against a weak year-ago quarter drove the jump. The bank also raised ₹34,390 crore of FCNR(B) deposits, about US$3.6 billion, and its net interest margin fell to 5.58% from 5.90% in June (the bank's figure, which excludes interest on an income-tax refund). Profit was 2.8% lower than in June.** ## The quarter in numbers | ₹ crore | Q2 FY27 | Q1 FY27 | Q2 FY26 | Year-on-year | Source | | ------------------------------ | ------- | ------- | ------- | ------------ | ------ | | Net interest income | 6,184 | 5,972 | 5,113 | +21.0% | \[P\] | | Pre-provision operating profit | 2,539 | 2,553 | 1,880 | +35.0% | \[P\] | | Provisions | 1,137 | 1,144 | 1,452 | −21.7% | \[P\] | | Profit after tax | 1,045 | 1,075 | 352 | +196.5% | \[P\] | The June-quarter figures include interest on an income-tax refund; excluding it, the bank says net interest income rose 4.5% from June (\[P\]). Deposits grew 25.9% to ₹3,48,583 crore (customer deposits excluding FCNR(B) grew 14.1% year on year and 2.5% from June, per \[P\]), and loans, including credit substitutes and FCNR(B)-backed loans, grew 30.1% to ₹3,46,913 crore (\[PR\]). Gross NPA was 1.32% and net NPA 0.40% (\[PR\]). Return on assets was 0.93% (\[PR\]) and return on equity 8.45% (\[P\]). ## The FCNR(B) effect The bank raised the FCNR(B) money "despite having no branch, subsidiary or representative office outside India" and says the deposits "are largely of 3-to-5-year tenor" (\[PR\]). It puts their fully loaded cost at about 1% below the cost of raising domestic fixed deposits, including priority-sector benefits (\[PR\]). On the margin it is direct: FCNR(B) "should benefit NII, PAT, EPS and RoE, although it is optically NIM-dilutive" because the balance sheet grew by ₹24,885 crore of loans made against those deposits (\[PR\]). The presentation gives the size: "Net interest margin moderated by \~32 basis points, from 5.90% in Q1FY27 (excluding interest on income tax refund) to 5.58% in Q2FY27" (\[P\]). The bank's bridge splits the 32 basis points into 16 from the denominator effect of the FCNR(B)-backed loans, 7 from excess liquidity, 4 from the day count and 5 from asset mix, and its best estimate for Q4 FY27 is 5.80%, a projection that includes a repo-rate hike benefit (\[P\]). Two adjustments the bank itself makes: - **Loan growth** was 22.2% excluding loans secured by FCNR(B) deposits (gross of IBPC), against 30.1% headline (\[PR\]). - **CASA**: the period-end CASA ratio was 47.6%, but 52.8% excluding the FCNR(B) deposits (\[P\]); the average CASA ratio was 48.4% against 50.1% in the June quarter (\[PR\]). ## Moat and margin **Focus moat: retail deposits.** The presentation's table shows CASA deposits of ₹5,274 crore at the December 2018 merger, when the balance sheet still carried ₹26,819 crore of legacy long-term and infrastructure bonds, against ₹1,65,963 crore of CASA now (\[P\]). Average CASA deposits grew 23.3% year on year in Q2 FY27, with average current accounts up 30.0% year on year (\[P\]). That is the moat the bank is building (our reading), and the bank says the FCNR(B) raise, done without overseas branches, "demonstrates the Bank's digital capabilities" (\[PR\]). **Margin and costs.** The bank says operating expenses have grown about 500 basis points slower than income for consecutive quarters, and that its core cost-to-income ratio improved to 70.16% from 70.73% in June (\[PR\]). At that ratio about 70 rupees of every 100 of core income goes on costs (our arithmetic). **Credit.** Credit cost fell to 1.01% of average assets (\[PR\]). Provisions include ₹100 crore of standard-asset provisions on the FCNR(B)-backed loans; without them, the bank says, credit cost "would have been 1.30% on Average Funded Assets and 0.94% of Average Total Assets" (\[P\]). It says 97% of its microfinance book is covered by the CGFMU guarantee scheme (\[P\]). **MoatSCORE: 5.91 (AMBER, first pass)** on the Moat Screener (\[MS\]). ## The bear case - **Profit fell from June**, by 2.8%, and pre-provision profit was flat quarter on quarter (\[P\]). The June quarter included interest on an income-tax refund; the bank's core profit after tax, which excludes it and trading gains, rose 15.5% from June to ₹1,036 crore (\[P\]). - **The margin fell 32 basis points** in a quarter, from a June base that excludes tax-refund interest (\[P\]). - **Return on equity was 8.45%** in the quarter (\[P\]), against the bank's stated aim of a consistent ROE of 16%+ (\[PR\]); return on assets was 0.93% (\[PR\]). - **A core cost-to-income ratio of about 70%** (\[PR\]) leaves little room if credit costs rise again (our reading). - **The big year-on-year growth rests on a low base**: provisions of ₹1,452 crore in Q2 FY26 against ₹1,137 crore now (\[P\]). ## The case for - **NII up 21%** and pre-provision profit up 35% year on year (\[P\]). - **Deposits up 25.9%** (customer deposits excluding FCNR(B) up 14.1%) and CASA of 52.8% excluding FCNR(B) (\[PR\], \[P\]). - **Asset quality steady**: gross NPA 1.32%, net 0.40% (\[PR\]). - **A debut investment-grade rating** of BBB- from S&P (\[PR\]). ## What to watch 1. The margin in the December quarter, with and without FCNR(B). 2. Whether the cost-to-income ratio keeps falling. 3. Microfinance and other unsecured credit costs. ## Sources - **\[PR\]** [IDFC First Bank, Q2 FY27 press release](https://nsearchives.nseindia.com/corporate/IDFCFIRSTB%5F24102026170906%5FBM%5FPress%5FRelease%5FQ2FY27.pdf) (NSE) - **\[P\]** [IDFC First Bank, Q2 FY27 investor presentation](https://nsearchives.nseindia.com/corporate/IDFCFIRSTB%5F24102026172636%5FInvestor%5FPresentation%5FQ2FY27.pdf) (NSE) - **\[MS\]** [Moat & Margin, Moat Screener](https://www.moatmarginresearch.com/moat-screener/) and [How MoatSCORE works](https://www.moatmarginresearch.com/moatscore/) --- > Educational research, not investment advice. Every figure above is drawn from IDFC First Bank's own filings, read from the primary documents on 25 October 2026; derived figures are our arithmetic, labelled as such. MoatSCORE read live from the Moat Screener on 25 October 2026\. No buy/sell recommendations, no price targets, no share prices. Moat & Margin is not a SEBI-registered Research Analyst or Investment Adviser.