India's IDFC First Bank hits 21-month low as microfinance stress hits Q3 profit (updated)

IDFC First Bank

27/01/2025 05:24

(Updates with details throughout, adds analysts', CEO comments)
       Jan 27 (Reuters) - Shares of IDFC First Bank  IDFB.NS 
fell as much as 8% on Monday to their lowest in 21 months after
the private lender said its third-quarter profit more than
halved, hurt by delinquencies in microfinance loans.
    The stock was on track for its biggest one-day percentage
decline since June 4. 
    On Saturday, the Mumbai-based mid-sized private lender said
gross slippages, or the loans classified as non-performing for
the first time, in the microfinance segment jumped nearly 49%
on-quarter to 4.37 billion rupees.
    Provisions and contingencies more than doubled, dragging
profit.
    The bank's net profit fell 53% on-year to 3.39 billion
rupees ($39.26 million) in the fiscal third quarter. 
    Net interest income, or the difference between interest
earned on loans and paid in deposits, rose 14% on year to 49.02
billion rupees. The bank's loans increased by 22% from the
year-ago quarter.
    "The microfinance industry continues to drag earnings and we
see the pain continuing for three-four quarters," analysts at
Jefferies said in a note.
    Microfinance loans, which are typically high-yielding
assets, fell 19.3% on-year during the quarter and were down
12.2% sequentially.
    "In the backdrop of lower growth in microfinance and some
unsecured segments, topline growth will stay softer at 14-15%
even as loans grow by 18-20%," Jefferies said.
    The credit issues in the microfinance segment are
"transitionary" and are likely to be resolved within a few
quarters, CEO V Vaidyanathan said in a statement.
    The stock is down about 9% so far this month, after losing
nearly 29% last year.
    IDFC First Bank continues to face challenges in managing
high operating expenses and elevated credit cost, particularly
in the microfinance segment, Centrum Broking said in a note.
        The bank's asset quality will continue to remain an
overhang due to the microfinance segment, JP Morgan said in a
note, downgrading the stock to "underweight" rating from
neutral.
  


($1 = 86.3470 Indian rupees)

 (Reporting by Sethuraman NR and Siddhi Nayak; Editing by Eileen
Soreng)
 ((Sethuraman.NR@thomsonreuters.com; (+91 9945291420); Reuters
Messaging: nallur.sethuraman.thomsonreuters.com@reuters.net))