Results out. 119 crore jump in PPOP.
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Idfc bank q1fy23 results:
- 1% RoA
- Gnpa drastically going down to 3.36% (would probably be lower ex the toll road account)
- Treasury losses are similar to previous Q of 87 cr.
- Retail segment profitability epic. Corporate profitability epic.
Slowly slowly 10% RoE 15% RoE can also come. Only the patience can reap the rewards since Rome & banks are not built in a day.
Disclaimer: invested, biased.
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10% ROE, 1% ROA from 6.67% ROE& 0.75 %ROA in previous quarter. With increasing operating leverage and slowing down treasury losses ROA&ROE will further increase. Asset quality improving. NPA ratios and absolute numbers improved sequentially. With a retail focused book with Presently PB ratio of 1.1, this is a rerating candidate for sure and a no brainer buy!!!
Disclosure: Invested. Recent transactions in 48 hours.
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Treasury Loss at 44 crs for Q1FY23. Thankfully not high enough that it could wipe off the profits of an entire quarter as was being projected by some brokerages.
Also important to note is that ex of treasury loss of 44 crs, RoE for the quarter stands at 9.1%!
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Focus: Operating Expenses… They were down, and profits have increased 8%
This is what VV meant by saying “profit jaw will open”
Very interesting.
He had promised this. That no more new expenses, and branch wise efficiency will start showing. It has!
This is only the start. I believe this is a first quarter in which we are saying some decent numbers.
Future could be mind boggling.
Waiting for investor presentation to see, NIM, Cost to Income ratio. It won’t be long before the metrics start looking better than other leading banks.
PS: for the ones interested, PE ratio now becomes 18
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ROA, ROE numbers look a bit elevated due to lower provisioning this quarter.
VV has guided for 1.5% credit cost, with that expectations - provisions for the quarter should have been 510cr but, they have provided only 308cr. ( Upcoming quarters will have >1.5% credit cost to compensate for this).
Factoring in 1.5% credit cost, PAT Would have been 330cr . ROA & ROE would have been 0.68% & 6.5%.
Directionally a great quarter and should put the bank at double digit ROEs by the end of this year.
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Three important questions-
There is no mention of the Covid Provision of Rs 165cr anywhere, either in the presentation or the press release. Has this been utilized entirely? If that is the case then provisions are optically lower by 165cr and Net Profits higher by 165cr.
Below is from Q4FY22 Press Release, can’t find it in Q1FY23-
Secondly why have NIM’s fallen by 36bps QoQ? That is a huge amount and much of it seems to be due to the increase in interes costs. Will they keep falling going forward?
Thirdly, Tier 1 Ratio is down to 14%. When do they plan to raise Tier 1 Capital?
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They have reduced saving account interest rates recently. It will mitigate the impact and NIM will grow again. In banks NIM fluctuations of 0.50 % are acceptable and is norm because they have to adjust their book to the RBI policy rates. Once the adjustment done NIM will return to the bank’s targeted levels.
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VV said no plan in FY23 in last call.
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Sorry but I beg to differ, NIM movements of 40-50bps for the entire book are huge especially on a QoQ basis. Also they have increased FD rates for all maturities so NIM’s might continue to be under pressure.
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I think homes loans woud have driven NIM down.
Also, I dont think 14% of tier 1 cap is an issue. It is still sufficienty higher than the reg requirments. So at least not req for a year until when the valuation improves.
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Yes and you can confim but last two capital raises were done when Tier 1 ratio came down to 13.25-13.50%.
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These leaps are probably due to operational efficiencies kick-in.
If it were an established bank, with operations running like clockwork, then yes, these bumps in numbers would be suspicious.
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Sure, but the diff is back then there was no certainty of internal accrual, couple of stressed accounts, covid, etc. Although I agree 25% growth rate would req capital raise soon but as VV mentioned not in fy 23.
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So VV confirmed in the call that 70cr out of this amount has been utilized, so one needs to adjust for that when looking at the P&L. Also fall in NIM’s seems to mainly be because they haven’t passed on interest cost increases to customers.
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Attended the concall…Some points noting
- Out of 162 cr covid provision 75 cr is utilised for the retail chain loan (total exposure 510 cr, as of now it’s 0) becoming npa. it was part of the restructured book.
- Nim compression qoq: Rate hike has not taken place. Rate hike will happen and benefit will be from q2. New loans are given at new rates. 37% of the book is external benchmark linked and rest fixed rate.
- Low credit cost, so ROA ROE can reduce in coming quarters? Operating leverage kicking in, Treasury loss not happening again.
can someone please share the link to concall
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The best and worst of the peer group are housed in the same bank. Industry leading NIM and Highest Cost/ Income ratio. IDFC First has achieved most of the targets it set out for itself. This should be the next in line.
| NIM | C/I | |
|---|---|---|
| IDFC First | 5.89% | 72.95% |
| Indian Bank | 3.10% | 41.94% |
| DCB Bank | 3.56% | 55.96% |
| Bank of Baroda | 3.07% | 54.81% |
| ICICI Bank | 4.01% | 42.30% |
| Kotak Mahindra | 4.92% | 53.16% |
| Indusind | 4.21% | 43.36% |
| CSB Bank | 5.17% | 57.67% |
| Union Bank | 3.00% | 47.61% |
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Bank is strategically not passing on Interest hikes to customers.
It has enough room to weigh down on NIMs and focus on 20% YoY growth in loan book, while making sure that it has a good set of customers on its books. That seems to be his priority, cuz I have been hearing him mention it in every concall, conferences etc. He has said it many times.
In current, Investor presentation (page 34), they have made an infographic around credit ratings of the customers.
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