Thank you everyone for the great discussion and analysis so far. I would like to add a few more things not mentioned but pardon me if something is repeated.
First, please go through all of VP’s Capital First Ltd thread if you haven’t already, it also has some pretty good analysis and gives insight into how Vaidyanathan does things.
I think the strategy of 7% and high branch density in urban localities is starting to deliver really well. Following are the ratios of CASA/outstanding debit cards (I think outstanding debit cards can be safely assumed to approximate the number of savings accounts, so this can be assumed to be average CASA per account).
3/2019 - 7893Cr/1463355 ~ 54000 Rs
9/2019 - 12473Cr/1745881~ 71500 Rs
9/2020 - 30181Cr/2432013 ~ 124000 Rs
I think this means existing customers are contributing heavily to CASA, seeing a big interest credit in the account every quarter is encouraging them to add more. Moreover, the average outstanding debit cards increase per month last year was ~45000, this year it is on track to be >60000. In September it was 99657, highest ever jump in a month. I would not be surprised if we see CASA increase by more than 10000Cr in Q3, but since the quarter is loaded with festivals it could be lower as people spend more.
Also, I have noticed in the bank’s engineering job openings that they are looking for someone with experience in Golang. IMO this is a really good sign of embracing modern tech, the language is relatively new and was designed to build highly scalable systems. The team is also consulting with people like this https://www.linkedin.com/in/laurencedejong/ to design their backends.
The bank is definitely making all the right moves, just hope they don’t chase growth at the cost of borrower quality. I personally feel the growth will be steady because people become more conservative as they age. I was overly optimistic until I went through all of CapF thread yesterday, still optimistic but doesn’t hurt to be cautious at this stage. This is my largest position but avg price is below PB 1 so I’m comfortable maintaining it at this point.
Hi Sahil, it would be difficult to condense all that, especially because I’m by no means an expert.
But I would suggest going through posts from 2016 until the merger to shorten reading time.
As per the RBI’s data, IDFC has highest no. of Micro ATMs (more than the combined no. of all other private banks put together). Can someone pls explain what is Micro ATM and why IDFC has invested in so many of them?
Erstwhile IDFC Bank had strategy where they wanted to leverage next door shops as mini branches vs opening branches. These shops were given these machines which will act as ATMs.
But the strategy did not really worked out…
Great analysis. While there has been an increase in the average balance per account, it also has to do with the increase in savings of the citizens during the pandemic. I think we have to wait for another 2-3 quarters and then compare the figures to make better sense of it.
Micro ATMs basically help to spread/extend your branch network at a lower cost. I think (might be wrong) htat focus on branches would be much more in urban areas and slightly lesser in extreme rural areas. Having said that, you can check this link for more info on it: https://www.idfcfirstbank.com/banking-products/micro-atms.html
I agree, the pandemic accelerated the already increasing trend. Even if it slows I think it will be easily offset by new customer acquisition.
There is one other interesting point I forgot to mention. In AR 2020 they mention owning more than 100 toll plazas, likely acquired from struggling infrastructure borrowers. What makes this significant is that there are only 562 toll plazas in total according to NHAI http://tis.nhai.gov.in/tollplazasataglance
IDFC FIRST Bank continues to be one of the leading banks with acquisition of over 100 toll plazas, having issued over 10,00,000 tags in FY20. The Bank has teamed up with various fleet owners, dealers and Tech service providers in the logistics space to provide Digital solutions which are simple and secure to use for the truck operators.
The bank will likely benefit from increased logistics movement going forward. I would appreciate if anyone can comment on how this would benefit the bank, there could be negatives as well because it’s not core business.
I feel the valuations or stock price movement would be completely dependent on how the core banking business is doing. This income would be a part of Other Income and will not be looked much into. Going forward, the bank might look to sell these too for a one time gain (or for setting off losses maybe)
This is precisely where Mr. Vaidyanathan comes into play. I don’t think he’ll be impatient. He has already built a Taj Mahal, he knows it takes time but the end result is worth the effort and patience.
Thank you for your inputs on the tech part, very interesting, such forward looking approach is exactly what sets winners apart.
Yes I’m still bullish on long term prospects, intend to hold it for more than a decade.
I invested because of Vaidyanathan, or rather in his dream of building a solid bank. I’m sure he means it when he says that and the whole team is working hard.
They have released a handful of loan apps recently https://play.google.com/store/apps/developer?id=IDFC+FIRST+Bank+Limited. Different apps for different products and dedicated teams behind them will likely improve operational efficiency, from serving customers to striking deals with manufacturers and everything in between as teams don’t have to step on each others toes.
The one I liked most is the referral app - https://play.google.com/store/apps/details?id=com.capitalfirst.connector. This will aid in reducing commissions paid to DSAs and as the customer base grows cost of commissions as a percentage of operational costs should go down because they can cross sell products. No data to back this up but I feel new borrowers referred by existing customers will likely be reliable borrowers as well.
If I recall correctly the count was 553 at the end of October, now at 577 so 24 new branches in a month! Branch expansion doesn’t seem to be slowing down
Just regular update -
I have met with Regional head responsible for raising retail liabilities couple of days back. He said They are getting CASA very thick and strong this quarter also. Also from one other employee i came to know they focusing on opening current accounts this quarter. And probably Credit cards will be launched by 15 dec 2020 with very good offers.
Query -
Does any one have noticed why IDFC First bank have lot of complaints on twitter? is it same for other banks also ? It is difficult to track for other main banks as they have multiple handles.
Yes, the number of complaints on Twitter is a lot. Major themes for these complaints are:
-Customers getting pestered for loans
-Automatic debiting of money for loan repayment even after the customer has got moratorium approved
-Automatic granting of loans when the customer didn’t even take it
But, you’ll find a lot of complaints against HDFC Bank too. But the theme is completely different.
Also, one thing I noticed: IDFC First bank’s app has 4.0 ratings on Google Play, kotak and hdfc have 4.3 and ICICI has 4.4, Of course the number of downloads for IDFC app is quite low when compared to other banks, but the management needs to focus here specially when it talks so much about technology.
I would not worry about negative reviews for 6-12 months more, their systems are most likely still in flux as a result of merger and new ideas/proposals experimented with to encourage innovation means less reliable systems overall.
I believe people are resorting to social media more because their customer service is more active compared to other banks. At least seems like that is the case. Of course I’m not saying they don’t need to improve but it will take time to mature.
It may help to compare reviews with banks of similar size rather than HDFC/ICICI/Kotak, at this time they are apples and oranges.
Yes, but what I mean to say is, it’s understandable that they are constantly calling people for loans etc, or someone getting debited for repayment. but loan getting issued randomly? that’s scary.
