IDFC First Bank Limited

To clarify, I was not criticizing you, it was more an anguish that when one quarter or two comes bad, how all of us immediately attack the same guy who dug the bank out of a serious hellhole. I thought you were drawing incorrect or rather unfair inferences hence commented, despite being his big critic, pl see my prior posts of many years.

I didn’t quite see the comment as a U turn at all. Everything has a context. The question from analyst was that you brought down cost income ratio at capital first so sharply in five years and why it is taking so much time for you here at IDFC Bank. My sense from the hesitation was that VV was guessing that it may be because in an NBFC entire borrowing is given out as loans… while in a bank 70%. Something like that. It was a response to a specific question, not a U turn. He probably still thinks model of banking license is better than NBFC. That is a separate question to ask, you need not connect that answer with this question.

On Capital First, yes it was 800, it had moved from 120-130 levels in 2012, so all of us who were with him enjoyed that ride. But everyone screamed that merger with infra bank is a bad idea, to top, IDFC Bank posted very bad results again and again all three quarters, 600 crores loss in Q2 19. IDFC Bank stock came down immediately and dragged down Capital First Stock with it because merger ratio was already announced and sealed. I made many comment in social media about this… but management didn’t listen and went ahead with their merger.

Capital first was on a roll, continued to post PAT growth of 40% plus even after merger announcement like they did in prior years, so it was clear to all that it was IDFC Bank results plus infra scare that dragged itself down, and brought down Capital First with it. At merger time IDFC Bank stock was 37 something.

On cost to income, I am no expert, but when C:I is 95 and you invest a lot into branches etc, C:I would have only gone up. So if it comes down to 65% in 7 years it sounds great job to me, though I am personally doubtful they can achieve that, looks tall order. Indusind has been around for 20 odd years. There is no parallel of infra DFI with low profits. So just going in good faith with management.

I asked some analysts why they value them so much at such low ROA ROE. They said smell is positive and there is belief. I spoke to some tech vendors of the bank they said this is one bank which is cutting edge. These things made me realise ther are other factors here, but I can’t get my head around it.

Btw, they are guiding for even higher provisions in q2 23, “provisions will be more elevated in Q2 and then will come down in Q3 and Q4”. Their words not mine. So don’t hold your breath for Q2 going by their own commentary. Lets see how markets take their weak projections.