GuruFocus – Release Date: January 25, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- IDFC First Bank (NASDAQ:) Ltd (BOM:539437) reported a 24% year-over-year expansion in its balance sheet, reaching approximately 3.3 lakh crores.
- CASA deposits grew by 35% year-over-year, indicating strong growth in low-cost deposits.
- Retail term deposits increased by 30% during the quarter, showcasing robust retail banking growth.
- The credit deposit ratio improved to 95.7%, reflecting a healthy balance between deposits and advances.
- The bank’s core operating profit, excluding trading gains, grew by 15% year-over-year, demonstrating strong underlying business performance.
Negative Points
- The CASA ratio slightly decreased from 48.9% to 47.4%, indicating a minor decline in the proportion of low-cost deposits.
- Operating expenses have grown sequentially, which could impact profitability if not managed effectively.
- The bank is still in the process of winding down a significant investment of 2,000 crores in setting up its branch network, which affects current profitability.
- The microfinance business has faced challenges, impacting both credit costs and income.
- The bank’s cost-to-income ratio in the credit card segment remains high, although it has been decreasing over time.
Q & A Highlights Q: Can you provide an overview of the bank’s financial performance for the quarter?
A: Sudhanshu Jain, CFO, highlighted that the balance sheet expanded by 24% year-over-year, reaching approximately 3.3 lakh crores. CASA deposits grew by 35% year-over-year, while the CASA ratio slightly decreased from 48.9% to 47.4%. Retail term deposits grew at a faster pace of 30%. The credit deposit ratio improved to 95.7%, indicating stable growth in deposits over advances.
Q: How has the bank’s asset quality and provisioning evolved?
A: Sudhanshu Jain noted that the gross NPA ratio improved by 7 basis points to 1.81% sequentially. The standard restructured book reduced to 0.2% of funded assets, with 97% of the book secured. The bank holds about 18% provisions, reflecting a strong asset quality position.
Q: What are the key drivers behind the bank’s profitability?
A: The CFO mentioned that net interest income (NII) increased by 14% year-over-year, driven by higher disbursements and festive season activities. Core operating profit, excluding trading gains, grew by 15% year-over-year to 1,736 crores. The bank anticipates normalization of credit costs in the coming year.
Q: Can you elaborate on the bank’s strategic initiatives and future outlook?
A: CEO V. Vaidyanathan emphasized the bank’s focus on building a comprehensive banking infrastructure, including branches, ATMs, and technology. The bank aims to reduce its cost-to-income ratio and enhance its credit card and wealth management capabilities. The CEO highlighted the importance of technology and superior customer experience in driving future growth.
Q: How is the bank addressing challenges in the microfinance segment?
A: V. Vaidyanathan acknowledged challenges in the microfinance segment but expressed confidence in the bank’s provisioning policy. The bank expects the microfinance business to recover quickly, contributing positively to both income and credit costs. The CEO reiterated the bank’s commitment to maintaining strong performance across its diverse product portfolio.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
