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IDFC First Bank reported a Rs 630 crore loss in Q1 FY2022 against a net profit of Rs 94 crore reported in the same quarter last year. The private lender attributed this wide gap to the provisioning measures the bank had to undertake for cushioning the impact of the second wave of the Covid-19 pandemic. Infrastructure loans were another pain point for the bank, with one particular borrower contributing to exposure of Rs 854 crore. Just this one slippage increased the bad loan ratio of the infrastructure segment for IDFC First Bank to 15% from just 5.7% in the March quarter.

In Q1FY22, the private lender made provisions to the tune of Rs 1,879 crore, up 146% y-o-y and 212% sequentially.

Even as the asset quality deteriorated owing to the Covid impact, total customer deposits increased by 36% to Rs 84,893 crore as of June 30, 2021, compared to Rs 62,409 crore as of June 30, 2020.

Net interest income (NII) of IDFC First Bank grew by 25% y-o-y to Rs 2,185 crore and by 11% q-o-q. The bank reported the highest ever net interest margin (NIMs) at 5.51% in this quarter as compared to 4.86% in the same period last year.

IDFC Bank merged with First Capital less than three years ago. The combined entity currently has 601 branches across the country. 

Hits

  • Net income from interest grew 25% y-o-y and 11% q-o-q to Rs 2,185 crore in Q1 FY2022. 
  • Operating income grew by 36% y-o-y to Rs 3,034 crore. The margin grew by 8% q-o-q from Rs 2,801 crore
  • IDFC First’s Net Interest Margin (NIM) climbed to the highest-ever level of 5.51% in the Q1 FY22 compared to 4.86% in the year-ago quarter.  
  • The bank maintained a Capital Adequacy Ratio of 15.56% in the quarter under review. 
  • The bank’s gross funded assets stand at Rs 1,13,794 crore with a 9% y-o-y growth. 
  • Customer deposits up by 36% y-o-y to Rs 84,893 crore. 
  • CASA deposits up for the quarter by over 50% to Rs 46,439 crore. 

Misses

  • IDFC First Bank clocked a net loss of Rs 630 crore for the June quarter compared to a net profit of Rs 127.8 crore in the previous quarter. 
  • Overall provisions increased to Rs 1,879 crore in Q1 FY22 up 146% y-o-y and 212% q-o-q.
  • The bank’s liabilities grew 4% q-o-q to Rs 168,986 crore. 
  • Gross Non-Performing Assets (NPAs) up by nearly 2% to 4.61% in Q1 FY22. 
  • Return on Asset reduced to -1.51% from 0.29% q-o-q. 
  • Return on Equity reduced to 2.73%. 
  • Wholesale loan book plummets by 15% to Rs 34,232 crore q-o-q. 

Company Statement

The bank says that lockdowns during the second wave of coronavirus coupled with no moratoriums impacted bank operations that led to slippages. “The bank believes that the full estimated impact of covid wave 2 is now provided for in the books,” it said in a statement.

“Gross NPAs and net NPAs include the impact of 84 bps and 71 bps, respectively, on account of one Mumbai-based infra toll account which slipped during the quarter,” the bank said in a statement. This is, however, an operating toll booth and the bank expects it to only be a delay. The bank has also marked a telecom asset as stressed and has provided Rs 487 crore against exposure of Rs 3,244 crore.

IDFC First Bank Managing Director and CEO V Vaidyanathan say that the bank has made tremendous progress within mere 2 years. With a high CASA ratio and trust of customers, the bank expects to gain traction in the prime home loans business segment going ahead.

What does This mean For The Investor?

Even as net profit is severely impacted, the bank’s core operating metrics in the first quarter of the financial year 2022 were healthy. With the growth in net interest margin and net interest income, the bank may be expected to be back in normal operations soon. Speak to your financial advisor before making any investments in the stock market.

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