IDFC First posted decent Q3FY21 results with improvement in operating parameters and sequential rise in loan growth. On the asset quality front, there was little disappointment but long-term prospects remain intact. NII was up 13.7% YoY, 5.1% QoQ to Rs. 1744 crore. NIMs expanded QoQ by 8 bps and 79 bps YoY to 4.65% despite interest reversals due to NPAs, supported by sharp rise in CASA deposits. Other income for the quarter jumped 31.1% YoY Rs. 759 crore. Fee income increased 33% YoY to Rs. 582 crore. Provisions for the quarter were at Rs. 482 crore, up 123% QoQ owing to rise in proforma NPA. PAT was at Rs. 129.5 crore for Q3FY21.
Valuation & Outlook
In terms of business, the bank seems to be on be on track to its long-term objectives of shifting loan mix in retail favour and higher retailisation of liability franchisee. The bank has been posting improving profitability in the past four quarters. Slippages came in higher in Q3FY21 owing to exposure to MSME segment, which was impacted by the pandemic. This is seen keeping credit cost elevated in next two to three quarters. With a prudent approach on the provisioning front and improving funding profile, we believe return ratios are set to improve meaningfully in the medium to long term with RoAs set to reach 1%. Thus, we value the bank at ~1.6x FY23E ABV with a revised target price of Rs. 52 (earlier Rs. 45). We maintain BUY rating.
For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_IDFCBank_Q3FY21.pdf
Shares of IDFC First Bank Ltd was last trading in BSE at Rs.47.7 as compared to the previous close of Rs. 46.6. The total number of shares traded during the day was 5013692 in over 15874 trades.
The stock hit an intraday high of Rs. 49 and intraday low of 46.55. The net turnover during the day was Rs. 238479940.