IDFC First Bank Q2 FY27 Earnings Call: Raises Rs. 34,390 Cr FCNR Deposits, PAT Jumps 196% YoY (IDFCFIRSTB)

IDFC First Bank Ltd held its Q2 FY27 earnings call on October 24, 2026. Here's a quick read of what management said — performance, strategy, and the outlook ahead.

Second Consecutive Rs.1,000 Cr+ Quarter; Core PAT Trajectory "Fairly Established"

• PAT of Rs.1,045 crores — up 196.5% YoY, marginally down QoQ (higher treasury income in Q1 FY 2026-2027); second consecutive quarter above Rs.1,000 crores. Core PAT (ex-trading gains, fraud-incident impact and income-tax-refund interest) crossed Rs.1,000 crores vs Rs.897 crores in Q1 FY 2026-2027.
• Core PAT trajectory — Rs.300 crore (Q2 FY 2025-2026) → Rs.430 crore (Q3 FY 2025-2026) → Rs.746 crore (Q4 FY 2025-2026) → Rs.1,036 crore (Q2 FY 2026-2027), a path management called "fairly established."
• NII grew 21% YoY / 3.5% QoQ (4.5% QoQ adjusting for Q1 FY 2026-2027 interest on income-tax refund); fee and other income grew 24.5% YoY; total income ex-trading gains up 21.9% YoY.
• ROA of 0.93% in Q2 FY 2026-2027 (H1 FY 2026-2027 ~0.99%); management reiterated it expects to reach 1% ROA (period unspecified). Core PPOP has scaled from ~Rs.750 crore in the merger year to ~Rs.10,000 crore annualized.
• Treasury gains modest at Rs.11 crores vs Rs.181 crores in Q1 FY 2026-2027 due to G-Sec yield hardening.
• Provisions of Rs.1,137 crores — down 21.7% YoY, ~flat QoQ, including ~Rs.100 crores standard-asset provision on FCNR-backed loans; the Rs.515 crores contingency provision created in Q1 FY 2026-2027 was retained given evolving macro/geopolitical uncertainties.

Rs.34,390 Cr FCNR Raise, Debut Offshore Bond, and the NIM-vs-ROA Trade-off

• Rs.34,390 crores (~USD 3.6 billion) of FCNR(B) deposits mobilized under the RBI scheme in Q2 FY 2026-2027 — ~10% of total deposits as of Sep 30, 2026 — with USD 2.6 billion (~Rs.25,000 crores) of FCNR-backed loans extended to NRI customers (~7% of the loan book). The bank garnered ~2.7% of the country's total mobilization under the scheme, ~1% above its pre-announcement NRI deposit share.
• Debut international rating and bond — obtained an investment-grade rating (S&P and KRS) and raised USD 950 million (~USD 1 billion) of debut bonds from the offshore IBU branch in Q2 FY 2026-2027, with no overseas branch, subsidiary or rep office.
• FCNR economics — the Rs.24,885 crore balance-sheet expansion dilutes NIM by 16 bps but the ROA impact is estimated at as low as ~2 bps (larger denominator lowers OpEx/credit-cost ratios), plus ~1% additional deposit-side benefit (incl. statutory benefits); FCNR deposits consume no capital. Management asked analysts not to read the 16 bps NIM dip as a red flag.
• FCNR cost advantage — FCNR(B) money costs ~6.8-6.85% all-in (customer rate 6.75%, annualized 6.85-6.86%, plus hedging, net of a 40-50 bps IBU spread, no PSL requirement) vs ~7.8% domestically including CRR/SLR — a ~100 bps cost-of-funds benefit on Rs.35,000 crore that is not in the bank's plan.
• Liquidity deployment — most of the Rs.34,000 crore raise came at the fag end of Q2 FY 2026-2027; the bank retired ~Rs.5,000 crore of bulk deposits and did not roll over ~Rs.5,000 crore of CDs, parking surplus in low-yielding investments/nostro. September LCR printed ~139% (average 125% in Q2 FY 2026-2027 vs ~115% normal run-rate); LCR expected to normalize to ~115-116% within a month, i.e., during Q3 FY 2026-2027.
• Deposit economics timeline — the ~1% overall deposit-side benefit (including PSL benefits) will flow through over time; with 3-5 year FCNR tenors, the full P&L impact could be visible starting FY 2027-2028.
• Savings rates progressively cut — from 7% to 6.5%, 6.25% and now 6% (above Rs.25 lakh; only a small intermediate slab retains 7%), with deposit inflows remaining strong on tech/mobile-app and service capabilities.

30.1% YoY Loan Growth; Corporate Book Scales to 20% of Loans

• Advances grew 30.1% YoY / 13.6% QoQ (incl. FCNR) to Rs.3.47 lakh crores; ex-FCNR(B)-backed loans (gross of IBPC), growth was 22.2% YoY / 5.7% QoQ to Rs.3.29 lakh crores, driven by mortgages, vehicle and consumer loans; business banking and wholesale each grew >30% YoY.
• Deposits at Rs.3.48 lakh crores (+25.9% YoY, +11.8% QoQ) as of Sep 30, 2026; customer deposits crossed Rs.3.4 lakh crores (+26.9% YoY incl. FCNR; +14.1% YoY ex-FCNR — growth deliberately calibrated given strong FCNR inflows). Bulk deposit ratio cut from 17.1% to 13.9%; CASA at Rs.1.66 lakh crores (+19.8% YoY), CASA ratio 47.6% (lower due to FCNR in the denominator).
• Core deposit capacity — management framed core deposit growth capacity at 21-22% (period unspecified) after a conscious FCNR(B) scale-back amid excess liquidity; guidance of at least 20% loan growth (period unspecified).
• CASA trajectory — average CASA growth ~30% YoY as of Q2 FY 2026-2027, though quarterly average CASA growth moderated from ~30% a year ago to high-20s in Q1 FY 2026-2027 and 22-23% in Q2 FY 2026-2027; management framed ~23% as the base case going forward (period unspecified). CEO committed to keeping the CASA percentage in the high-40s zone ("we'll do whatever it takes to keep it there").
• Corporate book — grown from 15% of loans in FY 2024-2025 to 20% in Q2 FY 2026-2027; net corporate book of Rs.70,000 crore (~Rs.1 lakh crore incl. non-funded), rated 76% A-and-above, 20% BBB, 4% BB-and-below. Yield of 9.2% and cost-to-income of 32-33%; management indicated ROA of at least 1.6-1.7% is "easily in the bag" absent credit costs on current book economics.
• Corporate asset quality — near-nil delinquency over the past 7 years across ~Rs.1.5 lakh crore of disbursals, the only loss being ~Rs.100 crore on a single ATM company; the CEO cautioned credit costs "could be lurking in the corner" but are currently very low.
• MFI and cards — MFI book marginally higher at Rs.6,825 crores (~2% of funded assets; 97% CGFMU-covered); credit card outstanding at Rs.9,875 crores with spends up 15% YoY; the book crossed 5 million cards.

592 bps Operating Jaws; 55% Incremental Cost-to-Income "Firmly in the Bag" for FY27

• NIM moderated to 5.58% from 5.90% in Q1 FY 2026-2027 — bridge: 16 bps FCNR-backed lending, 7 bps excess liquidity in low-yield treasury/nostro, 5 bps asset-mix shift, 4 bps day count (92 vs 91 days).
• NIM recovery path — management expects NIM to recover to ~5.8% by Q4 FY 2026-2027 as excess liquidity is deployed and factoring the expected repo rate increase during FY 2026-2027; Q3 FY 2026-2027 NIM guided flattish/range-bound as the FCNR drag peaks; Q4 FY 2026-2027 claw-back via day count (+8 bps), disappearance of the liquidity drag, and a 7 bps repo benefit (guided 7 bps net assumes 50 bps of repo hikes on a ~32-33% repo-linked book, ~16-17 bps gross, about half flowing through net).
• FY 2027-2028 NIM — per internal spreadsheet projections (assuming some cost-of-funds increase and repo hikes), management expects NIM of ~5.8% in FY 2027-2028. The 5.8% guidance does not factor in a capital raise; a raise before Q4 FY 2026-2027 would add "more cushion" to NIM, per the CEO.
• Opex of Rs.5,942 crores (+16% YoY, +3% QoQ); cost-to-income (ex-trading gains) at 70.2%, down 57 bps QoQ and 358 bps YoY; operating jaws of 592 bps for the quarter and 553 bps for H1 FY 2026-2027 vs guidance of upwards of 500 bps. Operating profit +38.5% YoY — third consecutive quarter of >30% YoY growth.
• 55% incremental cost-to-income — MD & CEO V Vaidyanathan said he is willing to be held to it and guided it to hold for FY 2026-2027, including H2 FY 2026-2027 ("firmly in the bag"), without committing beyond FY 2026-2027; trailing 12 months through Q2 FY 2026-2027 delivered incremental income of Rs.2,957 crore on OpEx of Rs.1,627 crore.
• Liability drag path — the 30 bps drag from the liabilities business (a loss of 0.7% of average deposits, ~Rs.1,500 crore net of tax) has trended down from 3% to 2% to 1%; management expects the drag to fall to zero over the next ~3 years (around FY 2029-2030), with asset-side ROA of 1.3% rising to 1.4%-1.6% over the same horizon on operating leverage.
• Cost of funds outlook — CEO gave an on-the-cuff estimate (explicitly "don't take it as a guidance") that blended cost of funds for FY28 over FY27 may rise only ~5 bps (safe case ~10 bps), despite assuming a 25 bps repo hike already done, 25 bps more in December 2026 (Q3 FY 2026-2027) and 25 bps in April 2027 (Q1 FY 2027-2028).

GNPA at 1.32%; Insurance Circular Offsets, ECL Rules and RBI Overhang

• GNPA down 19 bps QoQ to 1.32% (from 1.51% in Q1 FY 2026-2027; 9 bps improvement ex-FCNR leverage); net NPA 0.40% (0.43% ex-FCNR); retail collection efficiency stable at ~99.5%; bank-level SMA 1+2 down 4 bps to 0.58%; net slippage ratio stable at ~1.6%.
• Credit cost of 1.38% (vs 1.53% in Q1 FY 2026-2027), 1.30% ex-FCNR on average funded assets and 1.01% on average total assets — an all-time low of ~1.3% of loans / ~1% of assets, which management said is "reasonably achievable" over Q3-Q4 FY 2026-2027; affirmed comfort with the 1.5-1.6% credit cost guidance for FY 2026-2027, with the caveat that "unknowns are unknowns."
• El Niño watch — no early signs of stress in rural portfolios from El Niño or drought-affected districts as of Q2 FY 2026-2027, but management wants to watch the El Nino/drought impact in Maharashtra and Karnataka "carefully and cautiously" before making new comments; it is watchful of drought declared in a couple of states.
• Mortgage GNPA rose from 1.27% to 1.54% over the year to Q2 FY 2026-2027 — attributed to normal aging of a book being deliberately not pushed; management said there is nothing to worry given full mortgage security. Credit card SMA rose from 1.35% to 1.49% in Q2 FY 2026-2027 — termed normal quarter-to-quarter variation; credit card GNPA has declined from 1.99% to 1.49% and credit card credit cost is coming down.
• Insurance circular offsets — CEO V Vaidyanathan said back-calculating 1% savings on Rs.35,000 crore, plus the assumed rate increases ("25 plus 25" bps) applied to a ~Rs.1.2 lakh crore floating rate book, along with product changes, makes the offsets "match up in the zone" against the revenue hit (period unspecified). Management declined to confirm HSBC analyst Abhishek Murarka's ~Rs.1,200 crore net-hit estimate, directing him to rely on public numbers. Q2 FY 2026-2027 actuals: FCNR-related fee impact ~Rs.30 crore and OpEx impact ~Rs.60 crore.
• RBI consultation paper — management noted a draft circular followed by final regulations is largely expected from FY 2027-2028; if implemented as-is it would reduce fee income, but management feels the impact can to a large extent be offset by the expected repo rate increase (FY 2026-2027) and the FCNR benefit.
• ECL / operational risk guidelines — revised operational risk guidelines kick in from April 1, 2027 (FY 2027-2028); management reiterated the bank "could be a big beneficiary." Net effect expected broadly neutral on the CET1 ratio (CAR 14.66%, CET1 13.01% at Sep 30, 2026), with further clarity expected in ~Q3 FY 2026-2027; steady-state credit cost expected to rise slightly, partially neutralized by amortization of OpEx and processing fees — net ROA impact could remain small (period unspecified) and is "manageable" per the CEO.

Two Items to Watch: FCNR/NIM and Insurance; Growth Continues

• CEO flagged only two items for analyst attention — the FCNR/NIM angle and the insurance matter — stating management "feels comfortable that we'll broadly manage" the insurance issue; beyond these two items, management indicated growth continues and expressed a positive overall outlook.
• FCNR/NIM reiteration — closing the call, MD & CEO V Vaidyanathan reiterated that while FCNR base expansion dilutes NIM, it also brings down OpEx and credit cost in percentage terms, so ROA is not expected to be materially impacted.
• Analyst estimates — management sees no material changes to analyst estimates for FY 2027-2028 and believes those numbers are "broadly achievable"; management used analyst consensus FY 2026-2027 PAT of ~Rs.4,400-4,500 crore to illustrate that bank ROA nets to ~1.0% (~1.3% earned on assets less ~0.3% lost on liabilities).
• LDR and borrowings — management guided that deposits will grow slightly faster than loans going forward, so LDR should keep improving or stay in a stable zone (period unspecified); foreign borrowings (ECB/OFCB) mobilization is largely complete with no further pipeline as of the Q2 FY 2026-2027 call. Loan book mix: ~60-62% fixed-rate, ~31-32% repo-linked, balance MCLR.
• Credit card profitability — segment cost-to-income has been declining and stands in the 70s% range for Q2 FY 2026-2027, with credit costs also coming down; profitability "well on track" per CFO Sudhanshu. The zero-forex-charge feature launched in Q2 FY 2026-2027 has had no material impact so far, with the CEO expecting payback over time in customer goodwill, trust and higher spends (no timeline specified).
• AI disclosure — responding to Pritesh Bumb (Elara Capital), the CEO said AI is deeply embedded in products, journeys, processes and customer/employee experiences (e.g., faster loan application processing with AI reading bank statements, GST and income tax data); management may add AI/cybersecurity slides "next time," with cybersecurity "super important."