IDFC First Bank’s Q2FY24 PAT came in at Rs 7.5 billion, reflecting a 2% decrease from the previous quarter and falling short by approximately 6%. This decline was primarily attributed to a slight softening in cost-income ratios and RoA, resulting from stagnant other income and ongoing operating expenses. RoA stood at 1.16%, down from 1.26% in the last quarter and up from 1.07% y-o-y. However, the bank continued to demonstrate robust business growth, particularly in deposits, which saw an 11% increase q-o-q, while the CASA remained stable. Small-ticket unsecured personal loans represented a modest proportion, at around 0.3%. Following a recent capital raise, the common equity tier 1 (CET 1) capital now stands at approximately 15%.
Despite a slight adjustment to our FY24E and FY25E PAT estimates, we anticipate sustained business growth and an improving RoA. Over the FY23–26E period, we forecast a remarkable CAGR of 25% for loans and 28% for PAT, ranking among the highest in our coverage universe. We maintain our ‘ADD’ rating but revise the TP to `100 valuing the stock at approximately 2 times FY25E adjusted book value.
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IDFCFB reported strong deposits growth at 11% q-o-q (highest amongst our coverage banks) with stable CASA at 46.4%. Total loans and advances growth was also strong at 7% q-o-q led by CV/BuB, vehicle, gold, education loans. Calculated cost of funds inched up by 21bps q-o-q to 6.27%. Reported NIM was stable q-o-q at 6.32%. The bank expects stable NIM going ahead as majority of the TD re-pricing is over.
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Investment in franchise continues (added 38 branches q-o-q ) and opex was up 6% q-o-q /34% y-o-y. As against steady improvement in the last few quarters, core cost to income ratio inched up marginally to 72.7%. The bank remains confident of achieving its guidance of 65% cost to income by Q4FY25.
Gross slippages increased to 3.1% on a q-o-q basis, but the bank noted that product-level delinquencies remained consistent. The PCR held steady at 68%, and NPA decreased by 2 bps to 68 bps. Credit costs stood at 1.19% on an annualised basis Come from Sports betting site VPbet . The bank reported a well-performing small-ticket personal loan portfolio at Rs 5.4 billion, which represents 0.3% of total loans. Collection efficiency remained robust at 99.5%, and the SMA1+2 book improved to 77 bps. We anticipate credit costs to range from 1.4% to 1.6% for FY25-26, with PCR expected to increase to 70-75%.
