Brickwork Ratings reaffirms 'BWR AA+/Stable' on IDFC First Bank Ltd.

Brickwork Ratings have re-affirmed its existing ratings ('BWR AA+/Stable') in respect of Bank's NCDs and Bank Loan facilities. BWR factors in the bank's performance upto FY20, publicly available information, and information and clarification provided by the bank's management.

The rating reaffirmation factors in the bank's comfortable capital adequacy ratios of a total CAR of 13.38%, tier I ratio of 13.30% and CET-1 ratio of 13.30% and expected strengthening of these ratios in FY21; maintained business size of Rs.1.5 lakh Crs consisting of net advances of Rs.85,595 Crs and total deposits of Rs.65,108 Crs as of 31 March 2020 through increased focused on the retail portfolio. The bank has a strong board of directors and dynamic team of management under the leadership of Mr V. Vaidyanathan as its Managing Director and Chief Executive Officer.

The rating is, however, constrained by the increase in stressed assets ratio to 3.46% as of 31 March 2020, mainly from an increase in standard restructured advances to Rs.752 Crs in FY20; Additions to the NPA have been fluctuating over the last five quarters and were substantially lower for Q4FY20, which was mainly due to muted loans as a result of the regulatory moratorium having been extended effective 01 March 2020. Further, the net losses of the bank have increased from Rs.1,944 Crs in FY19 to Rs.2,864 Crs in FY20. Going forward, substantial increase in slippages for FY21 and its impact on the provisioning and profitability shall be key monitorable.

BWR continues to maintain the bank's outlook as stable as it expects the bank to continue increasing its business mix in favour of a retail portfolio over the next year, especially in better yielding assets, along with an increase in the CASA ratio, continual growth in earnings and operating profits, the maintenance of comfortable capital adequacy ratios and infusion of capital funds to assist business growth and manage incremental delinquency, if any. However, the incremental slippages from the bank's exposure to business loans especially in the retail sector shall be monitorable.

Shares of IDFC First Bank Ltd was last trading in BSE at Rs.20.3 as compared to the previous close of Rs. 20.4. The total number of shares traded during the day was 1263951 in over 37448 trades.

The stock hit an intraday high of Rs. 20.75 and intraday low of 20.05. The net turnover during the day was Rs. 25834667.

Source : Equity Bulls

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