IDFC First Bank Limited

Thanks @Utkarsh_Bharadwaj for the efforts around COF. Completely agree with COF coming down further and Bank able to maintain atleast 5.50%-6% range of margins in future. Would like to add couple of points around COF, Bank & NIM:

1. Stabilising technology spends and positive contribution from High yielding Credit cards + Cross sell from branches will further help to reduce COF as commented by Mgmt even after spends on adding more branches over time.

2. Industry leading services and innovation in age old products like Offering Auto sweep to FD facility for MSME CA Balance of INR 2 lacs will garner lot of Current account business. Bank has also built good Govt banking, startup business, MSME which have strong CA potential.

3. IDFCB has strong Risk people at the Top from ICICI, HDFC Bank and are focussing a lot on Rural banking, MSME with loans with Avg yield of 12-15% and bank is able to manage risk in that segment with high use of data and proprietary lending models & most importantly strong experience of lending in these segments. These loans will balance the lower NIM from Home loans, Vehicle loans in Tier 1-2 cities resulting from aggressive growth in Secured assets. Having followed banking closely, I don’t see any other Mid size bank with 25 plus loan products in Retail + MSME and still innovating. The problem with other banks is that they have close to 50% corporate book with lower NIM and focus on new products + customer service is lower. IDFC has less than 20% wholesale book where lending is more to NBFC’s and A rated corporates with exposures in the range of 200-250 crore.

4. Since the bank is going much granular, CASA customers will continue to adopt IDFCB over PSU banks and many other regional banks due to strong brand and services. Further, CASA customers today are not much concerned about interest rates on SA but more on security, ease of banking, products, customer support, App UI, Customer value. IDFCB is performing well on all these and should be able to grow its customers offering lower SB rates as well. Amongst the large banks, ICICI has been a pioneer in digital banking and today CTO of ICICI is with IDFC alongwith many other senior members. For eg: Being a First Select customer of the bank from last 5 years, I have never received a call from Bank/RM to buy any insurance or unnecesary product whereas there are ruthless eg’s of people being mis-sold ULIP by banks. There are many more references of strong customer focus and ethical banking which one will come across by using their services or reading AR.

Motto of the Bank is Ethical + Digital + Social good. Mgmt. has ensured that these are not words only.

If only IDFCB can keep the GNPA within 1.50%-2% bank level, it can do a 20-25% CAGR for a long time seeing the credit opportunity available in the country.

P.S.: Significantly Invested from lower levels & would be comfortable in averaging up over time with the progress of the bank.