Release Date: October 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- IDFC First Bank Ltd (BOM:539437, Financial) reported a strong year-on-year growth in deposits of 32%, reaching INR218,000 crores, which supports loan growth.
- Retail deposits increased by 37% year-on-year, despite a reduction in savings account interest rates, indicating strong customer retention.
- The bank's CASA deposits grew by 37.5% this quarter, with a CASA ratio of over 48%, reflecting a stable funding base.
- The retail loan book grew by 25% year-on-year, maintaining good asset quality with a gross NPA of 1.57% and net NPA of 0.53%.
- IDFC First Bank Ltd (BOM:539437) received a AAA rating from CRISIL for its fixed deposit program, highlighting its strong financial position and management practices.
Negative Points
- The bank faced significant provisions this quarter, totaling INR1,732 crores, primarily due to issues in the microfinance (MFI) business and a toll road account.
- The MFI business experienced increased delinquencies, leading to a conservative contingency provision of INR315 crores.
- A toll road account required a 100% provision of INR250 crores due to a government directive halting toll collections, impacting profitability.
- The overall credit cost, excluding MFI and toll provisions, was 1.8%, indicating challenges in maintaining low credit costs across the board.
- The bank's profitability was impacted, with a reported profit after tax of INR201 crores, significantly affected by the additional provisions.
Q & A Highlights
Q: Every quarter, there are some surprises coming up in our bank. How should we model for the next two to four quarters? And how are you seeing the environment for the housing finance in the next few quarters?
A: Housing Finance is stable and growing at 20%. Regarding surprises, we believed infrastructure issues were behind us, but unexpected state government decisions affected us. We are cautious about project infrastructure financing due to external risks.
Q: Regarding the credit card business, are we on the breakeven? And what are the delinquency rates?
A: The credit card business is stable with an SME of 1.69% this quarter, down from 1.88% last quarter. We are watchful of industry trends but our asset quality remains stable.
Q: Excluding the prudent extra provisions on microfinance, SMA book, and the toll account, you mentioned that the credit cost is 1.8% of the loan book. My calculated number comes to 2.15%. Is there something I'm missing?
A: Excluding MFI and toll provisions, the credit cost is 1.8%. The increase from 170 bps to 180 bps is not significant and is spread across the book, with a slight increase in personal loans but nothing worrisome.
Q: What could be the steady-state provisions we can expect under ECL norms for our bank from FY26 onwards?
A: It's difficult to comment on ECL timing, but it might come in FY26 or FY27. The impact could be around 10-20 bps, but this is not a firm guidance.
Q: Just a couple of clarifications. Firstly, the toll road account was a INR250 crore account or a INR500 crores account?
A: It was initially INR1,100 crores, reduced to INR500 crores through repayments. We had a 42% provision earlier and have now taken it to 100%, amounting to INR253 crores.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
