IDFC First Bank Limited

IDFC First Bank at Emkay Global’s Confluence, an Annual Conference.

V. Vaidyanathan, MD & CEO and Saptarshi Bapari, IR
10th August 2022.

Key Meeting-Takeaways:

• Management guides for continued focus on increasing share of the secured retail portfolio and expects loan growth at 20-25%. The bank has issued +1mn credit cards since Jan 2021, with the credit card book now at Rs23bn. For the bank, the focused growth segments shall be Home Loans, SME and LAP.

• CASA ratio remains stable at 50%, leading to lower CoF; the bank has thus been able to maintain industry-level high margins at 5.9%. Higher cost-to-income (C/I) ratio remains an irritant, but should trend down to less than 50% from the current 75%, supported by faster growth in income at 30% and slower cost growth at 20%.

• The bank remains confident about the improving asset quality. One lumpy toll-based project (Rs7.8bn), which slipped during Covid wave-2, is expected to be resolved within the next 2 years and thus help to improve GNPA ratio by 50bps. The bank guides to credit cost at <1.2% for FY23E, due to strong recoveries, and should thus support profitability.

• Covid has caused a hiccup, but the bank’s long-term strategic focus remains on maintaining credit quality, bringing down C/I ratio and reaching an RoE range of 13- 15% over the next 3-4 years.

*We believe the bank has done well on the liability front, but sustaining the momentum in a rising-interest rate scenario as well as bringing down cost ratios will be a key monitorable.