Note: This is a preliminary transcript and may contain inaccuracies. It will be updated with a final, fully-reviewed version soon.
IDFC First Bank Limited (NSE: IDFCFIRSTB) Q4 2026 Earnings Call dated Apr. 25, 2026
Corporate Participants:
Saptarshi Bapari — Head of Investor Relations and ESG
Sudhanshu Jain — Chief Financial Officer
V. Vaidyanathan — Managing Director & Chief Executive Officer
Analysts:
Piran Engineer — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to IDFC First Bank Q4 and FY26 earning 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 question after the presentation. Conclude. Should you need assistance during the conference call please signal an operator by pressing Star when zero on your touch tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Sapta Shri Babri, Head of the Investor Relations and ESG.
Thank you. And over to you sir.
Saptarshi Bapari — Head of Investor Relations and ESG
Thanks Dhanish. Thanks a lot for calling. And thanks everyone for joining the call. We have today with us Vaidya our Indian CEO and Sudanshu, our cfo. So we’ll start the call with a brief word about the financials for the period ending 31st March 2026 by Sudanshu. For that we’ll have some words from Vaidya and then we can open the call for the participants for the questions. Okay, so now we. I’ll hand over the call to Sudanshu.
Sudhanshu Jain — Chief Financial Officer
Yeah, thanks. 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. And my sequence would be to start with assets. Then I’ll 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 substitutes during the quarter. It has grown by 20% on a Y o y basis and it has now reached about rupees 2.9 lakh crores.
We saw a healthy traction across mortgages, vehicle loans, consumer loans, wholesale loans, business matching loans. Collectively these segments accounted for almost about 87% of the total growth. MFI. We all have been talking so there. The good part is after many quarters we have seen that the decline has got arrested. MFI book is about rupees 6662 crore at March 26. And now 89% of the book is covered through CGSMU. We saw also an increase in MFI loan disbursements that was higher by almost 27% on a sequential basis.
And even into the next year we see MFI book now again starting contributing to the overall growth and PNL 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 yoy basis. On wealth management side, AUM continues to grow at a steady pace. It has increased by about 23% to about rupees 57,000 crores. Now I have to call out few numbers. On the deposit side. We saw an increase in total deposits by about 16.8% on a yoy basis to rupees 2.94 lakh crore.
If I within 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 sorts of factors, we did reduce our interest on saving accounts in certain buckets. There was also an impact of the one off fraud incident which occurred during the quarter. There was also a tight liquidity which prevailed through the quarter.
There was advanced tax outflows and also of course the best Asia crisis. This all I think in conjunction had some impact on the deposit flows. Having said that, I want to again state that 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 CASA ratio, CASA ratio was at 49.8% which itself is quite strong for the quarter. On an EOP basis we saw an outflow of about 3,700 crore for some factors which I just mentioned before.
But on an average we see KASA 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 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 slippages here, the decline has been about 15% on a QoQ basis. And if you look at net slippages that declined by about 27% on a sequential basis. Even for MFI slippages that came down to I would see subs. 100 crores. It was in 96 crores from rupees 153 crores in the previous quarter. The gross slippage ratio ex MSI for the quarter was low with 49 basis points at 2.6%. Moving on, if I talk about collection efficiency that for Alibucket 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 touching 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 MSME portfolio that improved by 10 basis points from 0.88% to 0.78%. We have given far more detail in the presentation which sort 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 rupees 319 crore which includes certain one time items which we have called out in the presentation. Let me first tell what are few of these one line items which I meant. One is we have taken an upfront impact of the fraud incident which has happened in Q4 and that we have paid claims over 646 crore of principal and on a post tax basis that impact is about 480 crores. If I just gross up for the fraud impact then the pat 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 the core basis. One is we had a trading loss of about rupees one hundred and fifty nine crores on a pre tax basis which on a post tax translates to about rupees 118 crores. The loss here was largely because of the widening of yields which we saw during the current quarter. Like for instance the 5 year G6 widened by about 40 basis points, the 10 year G6 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 the guidelines which came around the NOP policy. Another one time which I want to call out which is in fact a positive to the PNL is we got some income tax order which gave us a tax refund of about rupees 173 crore. And so that has contributed to the positive side of the pnl. So if we take into account all three aspects which is the fraud incident 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 rupees 746 crore.
Visa is the 319 crore which we have reported. Taking those impacts. This 746 crore translates to about a 145% increase in PAT growth on a bio Y basis for the full year. Taking into account all the impacts which includes the fraud incident. The reported PAT is Rupees 16,36 crore. And if it adjusts for the fraud incident then on a post tax basis this went up by 39% to Rupees2119 crores. We saw an improvement across all operating matrices like for example NI growth further improved during the quarter to 15.7% on a YoY basis.
This was about 12% in the previous quarter and you would have noted that that trend for last no many quarters where this has started inching up. We had guided the market for a NIM of 5.85% for Q4 but happy to state that we have come with a NIM 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.
NIM 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 rupees 6249 crores. This includes the impact of the fraud incident of rupees 646 crores. On the principal side. If we adjust for this then the OPEX for the quarter was rupees 5,603 crores and which was a modest increase of 0.3% sequentially and about 12.3% on a yoy basis.
For the full year the OPEX growth was at 12.3% if we exclude the fraud incident. Moving on to provisions, this has reduced Q on Q by 18% from Rupees 1398 crores to Rs. 1143 crores. Overall credit cost for the quarter came at 1.63% 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 38bps 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 MFI. After usage of rupees 35 crores in the current quarter, we are carrying forward rupees 130 crores into the next year. If we were to adjust all of it, including that 130 crore, then the credit cost would have been 2.08% instead of 2.13% which are the reported 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 LCR 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 Vaidya for his opening comments.
V. Vaidyanathan — Managing Director & Chief Executive Officer
Good evening everybody. First of all, very happy to speak to all of you this Saturday evening. Now in this presentation this time we have actually shared with you the broad strategy of the bank which becomes important. Eventually the strategy translates to the numbers. So if you see page nine, 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 lend that maybe 20 22%. Now that is a very unique specialization the bank built over a long period of time.
It’s like 15 years we’ve been in that business and we have developed specialization in terms of within that which segments to go after. What is the credit performance of each micro segment within segments. For example, we don’t say MSME is too blunt. A for example we have a defined program for salons, for chemists and so on. 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% and that credit cost could be 4 or 5%.
You come up the curve, you know, you, that is where we started. But over a period of time of course our cost of funds came down at the NBF itself it came down to about maybe 9.5%. And then we started, you know, from, and then we started lending to more, you know, products which are medium yield, medium credit cost. You lend it about let me say 13, 14% and credit costs at 2 or 3%. Now over time, of course now we’re a bank, our cost of funds have further come down to 6%. So we are now able to give prime home loan, prime car loan and prime loan against 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, now low yield to 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 reason 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 if Sir Sudanshi called out the number for fourth quarter of this year or not it’s come down to below 2%. So in fact if you’re taken a five year through the period like five year, like 22, 23, 24, 25, 26 or maybe a block of five years, I think one year prior to that you’d find that credit cost of the bank is only 1.95. That includes Covid, that includes microfinance, everything.
So this number when we say that we’ll keep a credit cost less than 2% is not academic. We have been delivering it for the last five years. Of course last year was higher because of micro finance but 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 adjusted yield of 11% plus is a very unique specialization. So as far as we are concerned, by the way you have to also add 2% as a 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 deposits at part 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 the sense we’re still building the 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 needs to be priority sector. We’re building all that. Whether it’s a new bank, you’ve got to build all that. So the point I’m trying to just leave with you that the lending machine makes all the money, the deposit side money is as of today it’s loss 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, end of the day bank is making return on assets only 0.5%.
That’s true, it’s only 0.5, but 0.5 is not 0.5, 0.5 something is making 1% plus which is the asset side and the lending money side is 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 side of a bank to scale. So you think give it maybe three or four more. Maybe I can’t say three or four, let me say four or five just to be safe, you give that amount of time and then that deposit side loss will become zero after by the time we keep compounding at 20% plus is our opinion and profit should compound faster than that so you can see where the pattern the bank will head.
So honestly I feel that the bank is perfectly on track, it’s coming along very nicely. This micro finance 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, but that we factored in the quarter’s results. But you will see for most of you who will observe the Result quarter two, quarter three, quarter four, you will get to see that the trajectory is back strong.
That’s our broad belief. You can see it as it plays out. Now. The other thing about the bank is that we’ve been consistent with one story. We started with 94 crores in 2010. Today it’s 2.32 lakh crores straight in 15 years straight we’ve been consistent on one business model which is the model lending side 2.32. Well I don’t see any doubt why 3.2 should not become 5 lakh crores should not become 10 lakh crore. 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 machinery will move.
The good thing is also on the corporate banking side frankly the bank is doing well now. And you know after the initial phase when we slowed down the book, now we started growing it again. Not slow down actually we degrew the book to be fair we brought it down from 68,000 crores to bank to 36,000 crores. We degrew 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. It’s on a growth path and that will grow as well.
And you know we find our own niche. 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 touched about 2.9 lakh crore or 3 lakh crore I think so 2.9 lakh crore. And that story is also playing itself really quite well. It’s quite diversified across 25 Lancer businesses. So really no concern there. On the deposit side if you notice the deposit growth of this quarter was flat.
But really it’s kind of mixed up with three or four signals that came together. Like Sudanshu said, we dropped the rates, the incident happened. It’s hard to pick 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 kick the tires around and figure out any other part of the system issue for Example, even a retail customers and there’s no issue. Also we went and tightened some extra norms. So we’ve done those things. So maybe these kind of tightening strictures we’ve 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 this goes to, you know, 5 lakh crore, 6 lakh crore, 10 lakh crore, we will feel that it will come on even stronger.
God rails. And we just look forward to that. So now on the. In fact, I remember in 2122 that time also we dropped the rates once and the first time when you dropped the rates from 7% so for one year there was a slight flat. It was a flat year. If you see FY22, it is a flat year in terms of deposits. But then it starts growing again like that. This quarter was flat. It will come back. We feel quite confident of that. I want to finally say that the kind of goodwill we got during this crisis there was just so much of bad news overnight in a flash across 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 that happened as investors, we should really take note of this that there’s like 7 to 8 million customers leaving deposits. You 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 at the very high ticket size were with high interest rates. Some of them left. And frankly, when we dropped the rate from 7 to 6.5, people with high interest rates are expected to leave, but who had come to us for high interest rates are 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 ID you see bank 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 minds and hearts somewhere. It has helped us. We just want to take this opportunity or we can just call to say 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. We moved very Very quick, you know, you know this incident happened on Saturday afternoon. It’s when I was, 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, that night we reported the exchange trade. On Monday morning we took the investor call. Monday afternoon we called up the other party and said we’re going to pay you right now. And then Monday night we paid them.
Tuesday morning we met them in person. Tuesday afternoon we called up the newspapers and said we want a front page ad that day. We prepared the ad, next morning it is out. We just moved blinding fast with very quick, decisive ways saying that customers, money, customers 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 are also involved. Your responsibility, my responsibility.
We didn’t think anything. We just said it’s customers money payback. And I think that it’s in 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 the 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 now I want to just quickly move to cost of funds. 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.
Saptarshi Bapari — Head of Investor Relations and ESG
50
V. Vaidyanathan — Managing Director & Chief Executive Officer
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, 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 bank. At that time we were paying 150 basis points over mid tier peer banks, 150 basis points. We bridged that gap and brought it down and grew deposits despite this cut of it. So just want to say that 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 options open depending on what the market conditions are. But chances are the rates will probably be somewhere in the zone as the year progresses. Could be 10 basis points up. Also I can’t tell for sure. Depends on 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 for now, like you know, let me say five, seven years and particularly last two years when the micro finance crisis was raging and credit cost numbers are going up, we kept insisting and sharing with you product by product, vintage by vintage, SMA 1 and 2 SMA, you know, NPA credit cost, everything.
So we shared everything with you and we always maintain to you that except microfinance, this book is super clean. I am happy to say that it is turned out to be so because when the microfinance crisis is gone, suddenly a credit cause 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, growth NP is always less and net NP is always low. So I’m just happy to share that we give a lot of disclosure. If you notice, we give the the collection efficiency of the overall book excluding microfinance.
We give it including microfinance. Then we also show the SMA1 and SMA2 for the whole book. We show the gross NPA and net NPA for the whole book. And frankly every one of these 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 plus avatar. Our gross NPA net NPA credit cost is just fine. It is behaving very stable, no issue at all. Well, microfinance came, microfinance went. That did cause us trouble, but that is that we have called it out openly all the time.
And let me share with you, there was never any acquisition against the 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 there’s only for microfinance. So anyway, that stands, right? And on the corporate of course I’m happy to tell you that everything is cleaned out. So as I speak to you, I just stumbled upon this page where we talked about credit cost. I’m happy to tell you that credit cost for the full year has actually.
What is the number here? 2.13 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 a 2.69% for Q1, FY26, 2.24% for Q2, 2.05 for Q3 and 1.63 for Q4. So you can see that our credit scores are coming down. We are happy about that. And that actually gave us a space and frankly the beginning of the quarter, we knew it 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 the leading channels like cnbc and I came and said that we expect this to be a profitable quarter because we knew that credit cost of the quarter is 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 expect the deposit to grow, loans to grow, you know and Q1, you know, you should expect the bank to do report 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 say look where we going to just total it up and say we have one number, that’s what’s your roe? What’s somebody else’s roe?
And you want to compare. Well, you could do that. But I can tell you that a bank designing for 30 years or 40 years, you know, for them everything is amortized and everything is booked 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 the bank, think clearly that this bank is borrowing money at 6%, is lending money at 13%. So that gives a spread of 5%.
And then you have a credit cost on top of only 2% and then the fees of 2%, you can see for yourself it’s profitable. So just split up the two. See assets as assets. It’s a growing machine. You see, liabilities are something that is loss making. I don’t deny credit cards loss making. I don’t deny gold loans is loss making. I don’t deny home loans. New book is prime book is loss making. I don’t deny these are things which are building for the future. And some of the rural book we’re also building is also loss making.
I don’t deny this is all toast 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’s profitability come about. And you watch out, he says. 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 the questions.
Saptarshi Bapari — Head of Investor Relations and ESG
Please open the forum for the questions.
Questions and Answers:
Operator
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 handsets while asking a question. Ladies and gentlemen, we’ll wait for a moment while the question queue assembles. First question comes from the line of Param Subramanian from Investec. Please go ahead.
Saptarshi Bapari
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 we had that event and of course we’ve also cut down our sauv. 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 deposits?
Yeah.
V. Vaidyanathan
See we have generally seen that when people go through this kind of crisis, etc, it takes about a year, two or so for things to stabilize. You might have seen it elsewhere but we are quite confident that this matter is behind us. Q1FY27 itself, you will see a strong growth in the bank. The year that went by we already described it’s been flat. But flat also is good news for the quarter that went by. Like I said, we also cut the rates. But you should see, I mean we’re already seeing last year for last quarter.
Last month. That’s quite amazing. I already you told talked of goodwill or customers to us and I don’t know where they’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 already 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 we cut the rates this quarter onwards, you should see growth right now itself.
Saptarshi Bapari
So sir, we should get back to our say normal 20%. Yeah,
V. Vaidyanathan
Yeah. 5% QoQ, that kind of growth. Yeah.
Saptarshi Bapari
Okay sir, fair enough. So on LCR 114, it’s a bit low. So from next year onward we will be looking at a match loan and deposit growth or will this. No, no, we are comfortable. We
V. Vaidyanathan
Always maintain the comfort. No, we always maintain it. Comfortable with that kind of numbers because then you know LCR of 100 itself is a conservative number. You know, on top of it, we don’t need to keep too much of margin on top of it. It’s a good number. It’s quite stable.
Saptarshi Bapari
Okay. And frankly even during the
V. Vaidyanathan
Crisis it stayed strong.
Saptarshi Bapari
Yeah. So how do you think about margins going into next year? There is an uptick going into this quarter but should it likely be steady at these levels?
Sudhanshu Jain
Yeah, Param, thanks for the question. So margin for the full year is at was at 5.75%. And going into the next year also we expect it to be stable around these levels.
Saptarshi Bapari
Okay. 593 is what we reported this quarter. No,
Sudhanshu Jain
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 take convention logic and so on. But for the full year the margin was at 5.7% 75% and into the next year we feel we will be broadly able to hold around those levels.
Saptarshi Bapari
Okay, thanks. And on OPEX we are still holding on to what we’ve talked about 13 to 14% for next year.
Sudhanshu Jain
Yeah, that’s, that stays in terms of guidance.
V. Vaidyanathan
But though Please note that Q1 could be a little higher and then Q2, Q3 onwards it should come down. So for the full year is that. But Q1 could be a bit higher because of a couple of reasons because
Sudhanshu Jain
We have put out some branches, you would have noted about 80 branches in Q4. Q1 also has impact of increments and so on. So these could be, these are some of those factors which would play out.
V. Vaidyanathan
So when you see Q1 and see compared to Q1 of last year you’ll see a little higher than 1314 that we’re talking about. But by Q2 Q3 Q4 should come down and by year end we should be land the same day we landed this Year.
Saptarshi Bapari
Got it. Very useful. So Danshu, I think I heard you 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 ROE in this quarter. Again I want to check with you all, is there any say timeline one should look at for say broadly reaching 1% ROA? Because clearly your core ROA is improving.
Sudhanshu Jain
Definitely the core performance is improving as you rightly said if we isolate some of these one time impact within Q4. So I don’t want to sort of put out a number as such. We all know, right there is West Asia crisis is still going on, there’s still some moving parts. Right. So I would not want to guide on this 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.
Saptarshi Bapari
Yeah. So what credit card should be broadly work with. Yeah, that’s my last question. Thank you. For next year.
Sudhanshu Jain
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 CDSME cover which we have taken for msi.
Saptarshi Bapari
Perfect, very useful. Thank you so much. Congratulations once again on the quarter. Thanks.
Operator
Thank you so much. Our next question comes from the line of Akshay Jain from Autonomous. Please go ahead.
Saptarshi Bapari
Thank you sir for the opportunity. So I have three questions. So one on asset quality. So what is driving the strength this quarter? While you have utilized contingent provisions, your write offs are significantly lower. Any other factor you’d like to highlight? And again on write off they are down to like around 1200 levels. Like what is the sustainability of these levels going and related question on asset quality. So it’s been like almost two months since the war started and we keep getting news on you know, supply chain disruptions, raw material cost increases.
So while March was still fine, how are you seeing trends playing in April especially on the MSME front? And how are you thinking, you know, on growth and asybalogy in the light of these disruptions? And maybe the last. Yeah, sorry, go
Sudhanshu Jain
Ahead.
Saptarshi Bapari
And maybe the last question on the R8. So you have changed this week. So can you let us know the impact on, you know, your cost of star due to this change?
Sudhanshu Jain
You meant the recent change?
Saptarshi Bapari
Yeah, the recent change. Thank you.
Sudhanshu Jain
Yeah, that change would not translate over too much of an. From the current level, maybe a Few basis points, that’s on sa. Moving on to asset quality. In this quarter of course many things have played out. I have told that SMA 1 and 2 numbers improved by 10 basis points. Then the slippages which also led to a lower translation into slippages. Of course MFI drag 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 net net we feel that the asset quality trends would be quite stable. Now if I 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 portfolio to assess exposure to potentially impacted 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 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.
Saptarshi Bapari
Thank you sir. And just a follow up on the margin points. So even if I adjust your margins for the Q4 seasonality it is still around 5.85 odd level. So why are you giving a guidance of 5.75 for the full year? Why should margins come down from these years?
Sudhanshu Jain
See, we continue to grow certain portions of the portfolio at a faster pace. Like you have noted, wholesale banking book is growing at a fast pace. The business banking 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. It’s one of the highest in the banking system so you can assume that it’s. It’s. It’s quite the range amount in that sense.
Saptarshi Bapari
Understood sir. Thank you sir. Thank you for the.
Operator
Thank you. Our next question comes from the line of Piran engineer from clsa. Please go ahead.
Piran Engineer
Yeah hi Team Congress on the quarter couple of my questions have been asked and answered but need some clarification. Firstly this treasury impact, the loss of 160 crores. Now if I adjust for the stake Sale in that company we’d actually made a profit of 115 crores. Is that correct?
Sudhanshu Jain
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 crore. 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 crore loss on top of 159 crores in treasury line item we have also reported a lower provisions. However 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, this is an old case, legacy case where I said that this was fully provided. So this has no impact to the tnl. So for a right comparison we did this.
Piran Engineer
So then the real credit cost for the quarter is 870 crores or 870 plus this 270
Sudhanshu Jain
Plus plus this 274. And that’s how when we have quoted credit cost numbers it has been baked in. So this case was as I said is it was a much older case pre merger did it to the pre merger time and this was fully provided. This was in fact one of the infra exposure which we had.
Piran Engineer
Okay, okay, okay, fair enough. I think I might reach out separately. Did it
Sudhanshu Jain
Answer the question or I am happy. I will be happy to further clarify.
Piran Engineer
I’ll get back to separately. I was bit confused on my numbers but this clarifies it. Just if you,
Saptarshi Bapari
If you refer, if you refer to the investor presentation you’ll get the clarity on that on the PNO part.
Piran Engineer
Just secondly on is there any further TD repricing left or are we done with most of it?
Sudhanshu Jain
We may get some residual impact in Q1 but it’s largely done
Piran Engineer
Got. And just thirdly in terms of CASA ratio now we cut SA last quarter, we’ve not seen any impact on CASA. In fact our CASA ratios improved 40 bits. Do we take this as a more steady state CASA number like CASA ratio number?
V. Vaidyanathan
We’ll wait and see because you know even term deposits are also coming strong. So we’ll wait and see because the SARC rate cut rate is quite healthy with raw. You know just, just three months. So let me just wait it out.
Piran Engineer
Got it. Okay. Yeah, that’s it from my end. Thanks and all the best. Yeah, thank you.
Operator
Thank you. Our next question comes from the line of Jayant Karate from Access Capital. Please go ahead
Saptarshi Bapari
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 on these NIM levels and at 1.8 credit cost at 5.75 NIMS, it adds up to maybe around 75 Tbits. Correct me if I’m wrong. Which means we’re expecting almost 20 basis points of operating leverage translating to ROA through the next year. But also simultaneously that joy is slightly slower, which it seems that our growth is now going to be around 20, not 22 or 21.
So I thought, I mean even, even if I keep stretching this beyond one or two years, if 20% is the growth range, is this numbers, 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. Sudanshu
Sudhanshu Jain
No, definitely operating leverage improves into the next year. I’m saying 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%. Fee 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 job would sizably look better which definitely contributes to the ROA on top of it. I also sort of elucidated 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.
V. Vaidyanathan
One important insight which many may 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 say it again now. By our own internal estimates, we feel that the ROA of the A lending business for the next year it will look quite strong. And Sudanshu mentioned the reason we expect credit cost to be lower than this year even in absolute terms and you know, named to grow naturally, not in absolute terms. NII sorry NI to grow and you see how it will come now so basically we expect the profitability of the lending business to further improve next year.
When we do our internal estimates we look like it will be like 1.5, 1.6% of the loans. That is the ROA of the lending business to be somewhere in the zone like 1.5, 1.6% of the loans. But of course the liability side will still be a drag. But the good news is that the loan side is like rock solid. Even if you make 1.5% access state of the bank itself of loans, it’s pretty good. And obviously in the next few four years after that we 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?
Piran Engineer
1.2
V. Vaidyanathan
So 1.2 has come down to 1 and prior year was even higher. The trend line is clean clear so that you know that that 1% should become like 0.8 0.2, 0.8, 0.6, 0.2. Then that direction should play out properly. I mean we have, we see no doubt in the liability drag coming down to zero in the next two years. It is just, it’s just playing out exactly to plan.
Saptarshi Bapari
Thank you for that. Actually I was Comparing with the 4q numbers Banshu 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.
Sudhanshu Jain
Fourth Q credit cost is at 1.63% right. Our guidance is slightly higher for the full year into the next year on credit cost. 4qim is also higher
Saptarshi Bapari
Than what you’re guiding for the next year.
Sudhanshu Jain
No, no Q4 NIMS is higher but I said for the full year it’s at 5.75% and next year the NIMs should stay posted broadly. Right. Q4NIM is not the right comparison because of the day convention and some of these things
Saptarshi Bapari
From an you
Sudhanshu Jain
May assume NIM broadly stays stable fee we 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 should stop I
V. Vaidyanathan
Think you know answer this specific question. Even the prior gentleman asked why your we currently running even adjusting for the this quarter you’re like 280 or something for this quarter.
Sudhanshu Jain
Which one
V. Vaidyanathan
Sorry? 580
Sudhanshu Jain
You are
V. Vaidyanathan
Reporting fine. 580.
Sudhanshu Jain
Yeah.
V. Vaidyanathan
Adjusted for the. Yeah,
Sudhanshu Jain
But I’m guiding for 575 exactly.
V. Vaidyanathan
And you should explain why that’s basically because you’re coming to a little more a safer segment every
Sudhanshu Jain
Time I did that. Okay,
V. Vaidyanathan
So
Saptarshi Bapari
Maybe I’ll take this offline 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?
Sudhanshu Jain
As I said Jayant, I don’t know to guide to a particular number currently because there is this crisis, there are few moving parts. Right. But definitely the operating trajectory is improving quarter on quarter and we expect that to that Q4 trend broadly to continue into the next year in terms of an improvement in top line, maybe
V. Vaidyanathan
In a kissing distance if I would call it. So we’ll get to kissing
Sudhanshu Jain
The kissing distance
V. Vaidyanathan
Of that. But I can tell you that you know many people ask us about this ROA of 1% and many have said that look, 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 the play out because from there on also the full juices yet to be taken out. I mean the full value is yet to come out because operating leverage will improve for the next four, five years at a stretch now. So it will not stop at one whenever it comes there.
Saptarshi Bapari
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?
V. Vaidyanathan
Yes, yes, we definitely think so and we will, we will release it.
Saptarshi Bapari
Great. All the best and congratulations for holding up during the very tough quarter. Thank you very much.
V. Vaidyanathan
Thank you.
Operator
Thank
V. Vaidyanathan
You.
Operator
Thank you. Our next question comes from the line of Ankit Bihani from Nomura Holdings. Please go ahead.
Saptarshi Bapari
Yeah, thank you for the opportunity and congrats on the quarter. Most of my questions have been answered. I just wanted to ask how do you see see you know, deposit competition playing out going ahead. So while we did cut our SA 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 Phu banks, even the large private banks would have to fight for deposits to sustain the credit growth momentum?
Sudhanshu Jain
Maybe I’ll ask Vaidya to answer that question.
V. Vaidyanathan
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 branches are tails up. You know there’s a lot of hyper personalization happening. So there are a lot of tech involved in raising 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 has 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’ll be very strong. I can only tell you that our this month has started off very well. April has started off well. So we’re not disturbed.
Operator
Thank you. Our next question comes from the line of JJ. Mundra from ICCA Securities. Please go ahead.
Saptarshi Bapari
Hi, good evening and thanks for taking my question sir. First a small clarification this. 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?
Sudhanshu Jain
So we don’t want to call out that number. As we noted we have taken losses on MFI in last one or two years so we expect a reasonable recovery to happen on that front in the next year.
Saptarshi Bapari
And secondly on MFI book now, now this quarter the book has been flattish 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?
Sudhanshu Jain
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 guardrails have also been put into place. And of course we are adopting a cautious approach on the ground. Also how the collection efficiency trends have 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% into the next year.
So we will see how sort of the trend sort of stands out. So we want to grow this book.
Saptarshi Bapari
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 a very well for the last five years. But any thoughts on. We have small 130 crores of contingent provisions but any, I mean any working rough working that you can share as to you know what could be the transitional provision required if at all.
Sudhanshu Jain
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 comments 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 park some more capital on the ECL front itself on transition. But we may also get some benefit on account of the EIR approval approach because today the sourcing OPEX is more than the processing piece.
Plus there are also announcements around the change in the credit risk guidelines which come in from 4-1-27. There is also guideline awaited in operational risk. I think taking all of this together of course contingent on the guideline itself which comes. We feel that a transition capital should be largely taken care of. Should be largely taken care of. So we’ll see how some of these, this ECL guideline itself sort of comes out.
Saptarshi Bapari
Okay, sure. And last question while was there any impact of this CLM transition co lending model you know RBI had introduced from January 1st. The broad breakup does not suggest anything but just wanted to check did 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?
Sudhanshu Jain
I think we don’t have. We have a very small book here. In fact if I recollect we I think have this arrangement with only one counterparty and number is very insignificant.
Saptarshi Bapari
Thanks Sudanshu and all the very best. Thank you.
Operator
Thank you so much. Ladies and gentlemen, due to the time constraint that was the last question for today. I would now like to hand the conference over to Mr. Vaidyanathan for closing comments. Thank you. And over to you sir.
V. Vaidyanathan
Thank you. Since we closed sharp exactly one hour let me say that in case. Let’s just. If anybody has any last question to sneak in. We just want to give it last opportunity. Just in case
Saptarshi Bapari
We can take a last question.
V. Vaidyanathan
I mean if there’s none, I don’t hold it up
Operator
There. Also we’ll take the last question from Mr. Suraj Das from Sundaram Mutual Fund. Please go ahead.
V. Vaidyanathan
Just to be fair to everybody. Yeah. Yeah. Hi.
Saptarshi Bapari
Am I audible?
V. Vaidyanathan
Yes please.
Saptarshi Bapari
Yeah, I said just one. I think Data, Please proceed ahead with Your
Operator
Question. Okay, we’ll take the next question from Vikas Kasturi from Focus Capital. Please go ahead.
Saptarshi Bapari
Good evening, sir. So I’m also a shareholder of the company and long time listener and a first time speaker here. So please pardon my nervousness, sir. So I just wanted to ask you a question which I’ve been wanting to ask for last few years maybe so one is about this, you know, financialization of savings because of which a lot of money is going towards legislating mutual funds. And so in such a scenario how does the bank plan to continue raising Taza? This is my only question, sir.
V. Vaidyanathan
Thanks. We. I’ll keep it. First of all, Vikav, 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 we our book is relatively small. And like I said one of the earlier questions we had developed good capabilities, good digital capabilities, good brand, good culture. Employees are very motivated.
You can go to any branch and talk to a staff. You’ll 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 in the industry affects everybody, affects us also. But overall we are confident, Vikas, things will be fine. I mean we do strong on this front. We have no doubt on that front. 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. Y o y bank has good margin on an incremental basis. You have to only count on one thing. You have to only look for one thing, that our cost income ratio should come down. Because our liabilities had cost income should come down. Our liabilities at cost income ratio is 145%. It should. That is what is bringing up overall to 73, 70, 73, 74ish types. So that will come down. You could take it from me, it will come down hard 45 to 100 over the next few years. And when that comes down, bank cost will come down.
Bank cost will come down pat will go up. Things will all play out to plan. It’s playing out the plan even now. So that’s the thing to watch out for. Don’t worry too much about liabilities. It’s coming well,
Saptarshi Bapari
Sure. I’ve been an investor since 2019. Nothing can scare me.
V. Vaidyanathan
Thank you. Really, really grateful to you for that kind of confidence in us. We won’t let you down.
Saptarshi Bapari
Yes, thank you. Wish you all the best.
V. Vaidyanathan
Thank you and everybody. And thanks all the investors for participating in this call today. And some Sudan Shu, Sapta, myself and everybody in the bank, thanks a lot for your help and support.
Saptarshi Bapari
Thank you everyone. Thanks everyone for joining the call. Thanks.
Operator
Thank you so much. Sue. Ladies and gentlemen, on behalf of IDFC First Bank Limited, that concludes this conference. Thank you for joining us. And you may now disconnect your lines. Thank you.