IDFC FIRST BANK (PUBLISHED RESEARCH 2 MONTHS AGO
What's happening in IDFC First Bank?
Loan book as on
Dec 18 1.04 lakh cr
Sep 20 1.06 lakh cr
Growth of just 2% Right?
But what's fishing inside.
Retail loan as % of Total Loan book as on
Dec 18 35%
Sep 20 56%
Now why that's important IDFC before merging with capital first was significantly focused on wholesale loans but Capital First on the opposite side a play on Retail loan under extraordinary leadership under V. Vaidyanathan Sir!
Now why that's a big change of Wholesale to Retail?
Wholesale simply means big ticket size ,few clients and lower margins..and IDFC before Merger was bleeding NPA's.
Now Retail loan have lower ticket size, many clients , Higher rate charged and also Expertise of V. Vaidyanathan who knows in and out of Retail loan.
Which can be seen by Top 10 borrowers exposure
Dec 18 12.81%
Sep 20 7.07%
And Increasing NIM( Net Interest Margin- Basically the difference of interest paid and earned)
Sep 18 1.56%
Sep 20 4.57%
Significant credit goes to increasing CASA ratio( Current Account Saving Account Deposit- Cheap cost to the Bank) as % of Total Deposit
Dec 18 8.68%
Sep 20 40.37%
So What changes it brought to Gross/Net NPA's
Jun 19 2.66%/1.35%
Sep 20 1.62%/0.43%
Just to put on record...
Capital first (Succesful run)before merger had around 8.2% borrowing cost...so even if they are paying 7% better off 1.2%.
True that...
Also management reduced its provision from Vodafone by 800cr due to changes in Vodaphone circumstances..also to be noted that IDFC first bank was the first bank to make a 50% provision for Vodafone earlier
Now reduced to 25%
The amount released has been used to mKe provision for Covid19...with total provision already made to 1400cr towards covid..
Taking provision coverage ratio to 74% around.
Thing is about management integrity... which don't wait for becoming bad assets...but keep aside much before that...by sensing the possibility ....
Like we say very conservative management
also it is all about The person leading experience & Integrity!
And Q3 ,Q4 results may be worse off as NPA figure on moratorium will come out..but as said above the points also matter!
With all said and done..
Thr is higher Risk obviously than other banks..
Its all about is Management doing what they promised or in short walking the talk!
Also if i may add
In 1HFY21 during covid19
Company added
59 branches
153 ATMs.
Branches
Q4FY20 464
Q2FY21 523
ATM's
Q4FY20 356
Q2FY21 509
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