Q4FY21 Result Update - IDFC First Bank - ICICI Direct

IDFC First posted decent results with healthy business traction and stable asset quality. The bank is well on course to achieve its long term objectives of improving retail mix, improving NIMs and granularity on liability side. Net interest income (NIM) was up 15.3% YoY to Rs. 1960 crore despite Rs. 55 crore worth interest on interest reversals. Net interest margins (NIM) were up 4 bps QoQ to 5.09%. The bank has reduced savings interest rate to 4% for deposits below Rs. 1 lakh and peak rates of 5%, which should keep funding cost benign and, thus, aid margins. Other income was up 74% YoY mainly due to trading gains. Operating expense were up 11% QoQ to Rs. 2156 crore. This rise can be attributed to increased business activity. Cost-to-income ratio (calculated) was up from 75.1% to 76.9% QoQ. Provisions during the quarter remained elevated at Rs. 602 crore, up 25% QoQ. This was mainly due to additional provisions of Rs. 375 crore for Covid-19 risks. This additional provisioning was done from release of Rs. 324 crore worth provisions on its telecom exposure. The bank had tax write-back of Rs. 84 crore during the quarter. As a result, PAT came in at Rs. 127 crore.

Valuation & Outlook

In terms of business, the bank seems to be on be on track in its long-term objectives of shifting the loan mix in retail favour and higher retailisation of liability franchisee. The second wave of the pandemic could keep credit cost elevated in the next two to three quarters. Asset quality in the near term and opex structure in the medium term would be key monitorables. We value the bank at ~1.65x FY23E ABV and revise target price to Rs. 65 (Rs. 52 earlier). We maintain our BUY recommendation.

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_IDFCBank_Q4FY21.pdf

Shares of IDFC First Bank Ltd was last trading in BSE at Rs.56.25 as compared to the previous close of Rs. 55.35. The total number of shares traded during the day was 3132955 in over 11019 trades.

The stock hit an intraday high of Rs. 56.5 and intraday low of 54.4. The net turnover during the day was Rs. 174000320.

Source : Equity Bulls

Keywords