I dont agree here that NIM of 6% is unethical. One should see what are the lending segments of the Bank. NIM is a function of COF and Yields alongwith Fees. IDFC Yield on loans is around 12-13% which is higher on products such as consumer loans, Rural banking, LAP, Personal loans etc. There is high demand for these products in India since credit penetration is v low. Before commenting that Bank’s NIM are illegal, pl do detailed study into bank’s model & understand the mgmt. CEO Vaidyanathan is a Retail Lending Innovator who had built ICICI retail book by 2007 and has got strong retail experience. Management and lending is very clean for sure. It is a better mix of products which results in higher NIM. the Bank is also doing Home loans at 8.65%
Federal bank is unable to expand in unsecured retail since they are not confident in lending and recovery there. IDFC mgmt has more than 15 years of experience incl Capital first of doing consumer loans and retail and recovering money with less than 2% GNPA.
Federal is still a regional bank and IDFC is PAN India. Former’s book is still 45% corporate which supresses NIM since you cannot extract good NIM out of corporate lending. It is all about execution of successful strategies else there are many banks in India and Bank’s are not evaluated on PE model or undervalued model. It is long term sustainable growth model + Differentiator model.
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