IDFC First Bank Limited

This is based on an old article from Aug 2019, the pledge was removed recently

2 Likes

Will IFB declares profit this quarter? Keeping in view of the latest RBI Circular and regular NPA’s.

“Seemingly” Good results from IDFC Bank
Need to wait for commentary…
Investor Presentation:


Results:

6 Likes

Am I right in concluding that the 319cr trading gain would have come from the Yes Bank stake sale? Without that, the bank would have posted a loss.

Disc: Invested

2 Likes

I think you are not.

  1. I do think they have been fairly conservative in taking provisions (slide 4):
    "The Bank was required to make COVID-19 related provision of Rs. 25 crores pertaining to accounts where asset classification
    benefit was given. The Bank has provided the entire amount in Q4-FY20 itself and has additionally taken Rs. 200 crores of COVID-19
  2. (Slide 38) “Further, the bank has taken additional Rs. 200 crores of COVID-19 related provisioning proactively for overdues of 1-89 days taking total COVID provisions to Rs. 225 cr.
    Excluding the COVID provisions of Rs. 225 crores , the normal credit provisions for Q4 20 would have been Rs. 454 crores; Of the Rs. 454 crores of normalised provisions, Rs. 349
    crores pertain to Retail loans and Rs.105 crores pertain to wholesale loans
    related provisioning proactively for over-dues of 1-89 days taking total COVID-19 provisions to Rs. 225 crores.”

So if we exclude the pro-active provisions (which aren’t required to make) and the trading gains, they’d still have 14 crore of profits. It’s minor, but it’s there.

4 Likes

Good result.

Disc: invested at higher price, would look to add after September results

2 Likes

At what price of each share they have sold ?

They only invested 250cr and only sold 25% of their holding so its not from there but from their investment book which is 40,000cr. All banks have made trading gains on the their gsec holdings last quarter

6 Likes

I am seeing comments in social media that Covid provision of 225 Cr. is very less.

Axis & ICICI have covid provisions at 2700 & 3000 cr.

Given these 2 banks are far bigger than IDFC, am I right in saying Covid provision as a % of book is inline with the industry ?

additional covid provisioning of 2000 cr to be done on JJune first week…

1 Like

They have already provided to their corporate and infra book to the tune of 49%.so even those accounts are under moratorium, the provision is more than what is required as per rbi and way more than all the peer banks. Now coming to retail, microfinance and agriculture, they have to take 5% provision as on march and rest 5% in june. They have taken a provision of 225 crore on it along with regular provisions. Mr vaidyanathan has been clear in his intent IMHO. He had earlier done provision on accoounts which are standard and provision was not required. He is a prudent risk manager. I feel the provision is less, but i trust that the Man knows better than us about the quality of books and we should trust his judgement on it.

2 Likes

My belief is, a Retail borrower always pays back if he has money and always want to maintain the credit score. So, am more comfortable with retail than a corporate house which could go belly up and dont care.

Having said that, its key that Covid situation doesn’t affect jobs in a big way. This is a big uncertainty.
I would look at Retail borrowers of Bajaj Finance & Capital first arm in same way. Both will have similar demography of borrowers. So, impact wise both should have similar impact. But capacity to bear that blow could be easier at Bajaj due to its superb balance sheet. But IDFC first being a bank should be able to bear that IMO.

Looking forward to the mgmt commentary.

I do hope that in this extraordinary times, banks takes a pause at branch expansion & consolidates.

3 Likes

They mentioned 35% in the Investor presentation as the % loans for which moratorium has been given. But then they have taken only 225 cr as provisions. Others have taken bigger provisions to be on the safer side. I think we may see bigger NPAs and provisions in the next 2-4 quarters

The presentation shows that the unsecured book of the bank is just 10,000cr, a 250cr provision is more than sufficient for that (2.5%). They already have provisions of close to 4000cr for the rest of the book (corporate + infra) . I think Kotak has provided 600cr for covid with a much bigger book, so doesn’t seem unreasonable

2 Likes

Also important to remember that Vodafone NCDs are coming up for repayment in July (these are the ones owned by MFs, I assume IDFCB owns the same ones), so that issue is going to get sorted out one way or the other. Provisions for that alone are 1600cr and there is a decent probability that it gets written back esp if one sees the positive impact covid has had on the telecom sector and valuations in that sector. Vodafone plc has put in money twice in the last few months to keep things going and its unlikely that they will now let Vodafone go out of business

3 Likes

https://www.idfcfirstbank.com/content/dam/IDFCFirstBank/PDF/IDFC-FIRST-Bank-Investor-Presentation-Q4FY20-new.pdf

1 Like

Yes agree, it is clear that promoters of Vodafone have decided to stand with their company otherwise they would not have put up any money.

1 Like

DCB Bank has made no special covid provision and has 63cr as regulatory provisions against the moratorium requirements. Similar regulatory required amount for IDFC Bank is only 25cr with a book 4x the size of DCB’s which shows the quality of their remaining book. Also the 250cr provision on top of that.

1 Like

It only shows that VV wanted to report some marginal profits for a qtr before returning to standard losses. You can’t judge the quality of the book still. Lets wait n watch next few qtrs. My feeling is that it is bad as they grew the book very fast

IDFC FIRST Bank senior management takes 10% pay cut. MD & CEO takes 30% cut in compensation.

4 Likes