IDFC Bank from IDFC, valuation and future earnings.

Sure, I'll update you all about the service experience. Their clear thrust is online for now. The first branch in Mumbai will be at Prabhadevi near Siddivinayak. The bank is using TCS Bancs as core banking solution for now. I've given my feedback with preference for Infosys' Finacle. Looking at tie-ups with some corporate houses for salary accounts (RIL is a possibility) which will give a boost to the CASA. Mumbai has like 60-80 accounts now.

 

received welcome kit last Friday and it was a surprise from the usual paperwork that we get
only debit card and cheque book in the package, the customer gets to set PIN, net banking credentials easily on the bank's website
customer service seems to be very helpful (at least this is the beginning phase)
occasional problems with connectivity on net banking, there's no dedicated app yet but you can use mobile website

 

A tin can with welcome kit? What's it about?

 

So what are the initial set of banking services being offered to a retail customer like you?

 

it's a tin like one used for wrist watches, only has a Debit Card & Cheque Book

everything is available, but if you are someone who likes to walk into a branch or deal in cash, IDFC Bank is not for you
loans will be starting in Jan 2016

PS - I'm not an employee of IDFC or IDFC Bank. Just signed up to try the services.

 

I am just not the type who wants to walk into a branch or ends up having to do it. Infact i dont recollect when i last walked into my two primary bank branches. Even cash is picked up/delivered at home and its not that my branch is just round the corner from where i stay.

Therefore i asked....

 

not aware if they are offering the premium/home banking services yet, also very rarely have any cash transactions and all of our transactions are done thru net banking

when i was working at Axis Bank - there was a product offering which had cash pickup/drop facility and last i heard it was discontinued or scaled down considerably

you banking with Citi Gold or other Indian bank? Kotak was offering that on my previous salary account

 

Not citi. Its hdfc, yes, kotak and one of my previous employer

 

RBI will be issuing Payment Bank licenses sometime in near future. Will it affect the CASA biz of most banks? Would it affect IDFC Bank biz model?

 

Yes payment banks will hit at CASA.....

IDFC Bank will only frustrate investors

 

I just read a few articles about the payment banks. There is going to be massive competition for CASA.

Imagine Vodafone or Idea with their vast distribution network offer cash deposit and withdrawal services. They will only need a debit card and a card reader costing few thousand rupees for processing the cash.

Or Reliance Industries offering cash deposit and withdrawal via their retails stores, payroll pumps and soon to be activated Jio distribution network.

Who would go to bank branch or atm for cash transactions? Their networks are miniscule compared to the networks for telecoms companies.

There is going to be massive competition for CASA.

 

Guess my stand on IDFC bank stands vindicated

BoAML. - has initiated coverage on IDFC Bank with a neutral rating and target price of Rs 70 per share. It believes the transition to a bank will be painful, as it expands distribution and meets regulatory requirements, hurting its profitability.

Goldman Sach - also has initiated coverage on IDFC Bank with a sell rating and a target price of Rs 57 per share. It feels that the business strategy appears mixed and is unlikely to lead to a strong retail build out in the near-to-medium term, which could have otherwise, partially offset the high regulatory cost. As a result, Goldman Sachs expects IDFC Bank to deliver below median return on assets (ROAs) by FY21 and lower headline loan growth versus other private banks.

 

I follow a rule , regarding spin off which is born off my own experience and inspired by many genuine experts ,- think of buying a spin off after about one year when price gets stablised .

 

Yes Dear Sachin,You are right presently and Congratulation of being so, but BOAML and GS are not always right ,we had seen it in past.I still hold the view Indian 1.3 billion people can take care of many player in any field provided product is good.More over there are many PSU banks ready to lose market share.I can not declare any student as failure on first day of schooling.Edison and his mother proved that wrong.He was ousted from school blaming poor IQ.But her mother told the teacher that your school don't have teacher to teach my son.I would remain invested till they are proved wrong as per your assumptions or GS or BOAML .I hope management of IDFC bank and DCB bank must be listening all noise against them.This must prove to be a fodder to perform if they have desired quality .If not better they take retirement .If I would have been one of them,I would have either perform or had taken retirement . But in this type of process I have list of misses along with hits.After all NPA is not monopoly of banking,We small investers also have fair share of NPA as we are also investing in almost same sectors of economy directly ,what banking is doing,rather we had only residual and left out charge in case of any thing going wrong.

 

IDFC Bank is a conviction bet based on the following :

- honest & competent management
- strong balance sheet
- differentiated business model

My time horizon on this is Five years at least with buys triggered for now when it goes below 60.

The arguments in its favour, before it listed ,continue to be valid. it will continue to have a tepid performance for a few quarters, esp since there is an opportunity cost to investing in it.

But it fits my investment approach to a T. I will personally judge my position on this after two years. In the meantime, I will continue to read the nay saying reports with great interest.

 

The points mentioned are strong and well accepted. However Indian banking industry may be on the verge of a structural change with the payment banks and small finance banks.

Being cautious before investing is part of value investing.

It is quite possible IDFC Bank may be available at lower levels making it more attractive.

 

I think basic point is that banks are not monopoly with RBI decision to give license on tap. Also there are strong NBFC like Bajaj Finance, L&T Finance, CAPF filling needs of costumers.

 

Whilst the oligopolostic positions enjoyed by banks will start crumbling, its also the associated changing customer prefences, reluntance of clients to change existing banking relationships, ongoing need to have the technological edge and importantly some earth shattering regulatory changes that are occuring that make the small and medium size (on the fringe) very vunerable

 

I agree with all the above points. I think IDFC Bank is a part of the new age banking paradigm that is assaulting status quo. But certainly, the buying has to spaced out over a long period of time.

 

Nearing Rs 55. If markets remain weak, it may slip below Rs 50.