Key Bond Market Deals: Idfc First Bank, Hdfc Securities, Tata Capital Housing Finance (cnbctv18.com)
This is about IDFC First Bank raising Tier 2 bonds.
HDFC is mentioned. Blackstone will prob be bidding very aggressively after missing out on L&TMF to HSBC, expecting a good valuation.
Recent VVās press statement:
āIām very happy because I believe that the foundation is laid now, it is an excellent springboard for the futureā¦ With that foundation, the bank can really take off to future growthā¦ Now after getting 51 percent CASA, we can grow the loan bookāthatās what I mean by saying the foundation is very strong.ā
Now there will be added growth in EPS. Earlier, shifting from high cost capital to low cost CASA and corporate and infra loan getting converted to Retail loan were main source of increased profitability.
Double digit RoE might not be as distant as we earlier thought.
With newer branches not being opened, and management focusing on per branch efficiency, hence OpEx being under check.
Also:
āThe key thing that we should focus upon is profitability. So now the bank, I believe, or let me say, the people should expect to see a strong rise in profit and profitability from this quarter onwards. And weāve already demonstrated it in the quarterly results that just ended.ā
Now, it looks like, next few quarters will be blockbusterā¦ Flower samjhe kya, nai itās fireā¦
Technically as well, the stock is positioned to uncoil. One good week will unleash a sharp rally. VV has left no stone unturned!
If bank has excess liquidity, why bank is doing this?
Or in last 1 month liquidity position has changed and they are going aggressive again?
Every account the bank manages involves cost. That is one reason banks says you need to maintain minimum balance to have the account active. A passive account without money will be a loss for bank. So I think bank is asking to maintain money in the account by giving these offers. Same with debit cards ā¦
Hope this answers your question
Iām not sure how true this is, especially when you achieve scale.
I have closed a few of my bank accounts citing unable to keep minimum balance, all the banks immediately came back with an option to convert that account to zero balance account. If what you say is true, how could they offer such a thing?
This is just a ploy by banks to keep atleast a minimum amount in casa.
Very true, Though I sent an application to close one account each with Citibank and BOI many years ago, I am still getting balance statement for the 100 odd rupees in the account accrued through interest payment. Not to mention the Jan-Dhan accounts which are mostly zero balance.
Excess Liquidity is a āas of dateā situationā¦ Banks continuously need CASA deposits within a range as they keep ramping up their lendingā¦ There are 2 ways to get itā¦ One is - Go out aggressively and scout for new customers, second is increased the per account deposits. The first is a costly option, which involves opening new branches and paying to the partners - which IDFC has been doing so far. The second option is less costly and involves prodding and nudging to milk the existing customer base and to improve efficiencies of existing infrastructure they built - which is what they are doing now
So if you see, interest rates in the financial system have inched up 0.6%-0.7% in the last 2 months( Taking gsec yields as the benchmark). This obviously also means that borrowing rates from CDs and money market have inched up.
As a first step, even IDFC First has increased FD rates by 0.25% with effect from 21st January, 2022. Now the thing is banks avoid such tinkering with Savings Account Rates very often as it tends to confuse customers. So rather than changing SA rates, banks may want to reward customers in ways different than increasing SA rates including but not limited to cashbacks, instant discounts, vouchers, merchant tieups etc.
Also note that VV has guided for an 18-20% loan book growth in FY23 which means the bank has to continue to garner low cost CASA to match the needs of the asset side of the business.
Yes, but the bank has ample liquidity for the short term (evident from high interest received from RBI) and these incentives donāt make people keep the money for the long term which the bank needs.
IDFCB has raised 1,500cr at 8.42 via Tier 2 bonds for 10 years. Around 150bps above the risk free rate, quite decent all things considered.
It appears profitable, NIM would be intact. But, itās not encouraging to know that the bank couldnāt do any better. Shriram transport finance raised at 6.80%. Kotak wouldnāt raise at this rate.
On the flip side, itās a good move
*Considering rising rate scenario. Possibly two years down the line 8.42% will look good
*Its sticky. 10 yr expiry.
*Considering that the bank is aiming for 20% growth, it can put the money to good use.
Thats for 2 year bonds. Secondly these bonds are quasi equity in nature and are much more risky so the rates are much higher.
If IDFC merges with IDFCF bank, would it remain a retail bank as presently shown?
Is IDFC is pure holding company including IDFCF+AMC or having legacy infra loans apart from this?
Amc would have to be sold off. Rbi guidelines only allow a reverse merger if the parent is a pure holding company. So, idfc will first become a pure holding company then there might be a reverse merger. At Max it can hold some cash and that might be a way for idfc first to get some capital infusion at favorable valuations.
Many possibilities are possible. See the idfc thread & read only the posts by @manikya_saiteja_gund if you are short on time heās done a fabulous job covering all the various aspects of the reverse merger.
Capital Adequacy is at 16.5% now.
Sad News : Bank lost their CRO ā¦
Intimation of sad demise of Chief Risk Officer (CRO) of the Bank and appointment of new CRO.