*IDFC First Bank 1QFY21 Results (Improving trajectory of core performances continues) (second consecutive quarter of positive net profit) (Morat book at 28% higher than peers, though management expects this to drop to below 10% by August end) (sharp improvement in PCR to 75%) (CMP INR 28/Share, TTM BV INR 30.7/Share, Valuations- 0.9X TTM BV) (Remain positive on long term prospects)*
Loan Book Details- Total Funded Loan Assets stood at Rs. 1,04,050 crore as on June 30, 2020, compared to Rs. 1,12,558 crore as on June 30, 2019 and as compared to Rs. 1,07,004 crore as on March 31, 2020. As the stated strategy the Bank focused on growing the retail loan book and decreased the wholesale loan book including infrastructure loans to reduce concentration risk on the portfolio. *Retail loan book forms 54% of total loan book.*
*Strong momentum in building Deposit Franchise- * CASA Deposits posted strong growth, rising 145% YoY and 14% QoQ to Rs. 23,491 crore CASA Ratio improved to 33.74% Vs 31.87% QoQ. Core Deposits (Retail CASA and Retail Term Deposits) increased 139% to Rs. 39,872 crore as on June 30, 2020. This signifies the sticky and sustainable nature of the growing deposit balance.
Q1 FY21 Net Interest Income (NII) grew 38% Y-o-Y to Rs. 1,626 crore, up from Rs. 1,174 crore in Q1 FY20. Despite the COVID-19 pandemic and lockdown impact, the Q-o-Q NII grew by 4%. ▪ *Net Interest Margin (quarterly annualized) rose to 4.53% in Q1 FY21 up 30 basis QoQ. *
Fee and Other Income (without trading gains) decreased 54% to Rs. 148 Crore in Q1 FY21 as compared to Rs. 321 crore in Q1-FY20 due to lower loan originations and reduced banking activity on account of COVID-19 pandemic and related lockdown throughout the country. The trading gain for Q1-FY21 was at Rs. 337 crore.
Operating expenses declined sharply by 20% QoQ to INR 1,219 crore.
Pre-Provisioning Profit (PPOP) increased by 181% to Rs. 892 crore in Q1 FY21 as compared to Rs. 318 crore in Q1 FY20. ▪ *Without the trading gain, Core PPOP, which is the Core Pre-Provisioning Operating Profit (Total Income net of Treasury gains and operating expenditure) increased by 69% on YOY basis from Rs. 328 crore in Q1-FY20 to Rs. 555 crore in Q1-FY21.*
The provision for Q1-FY21 was at Rs. 764 crore as compared to Rs. 1,281 crore for Q1 FY20 and as compared to Rs. 679 crore in Q4 FY20. In the first phase of moratorium, the Bank took COVID-19 related provision of Rs. 225 crore through the profit and loss account in the quarter ending on March 31, 2020. *During Q1-FY21 the Bank has created additional COVID-19 related provision of Rs. 375 crore to further strengthen the balance sheet. Total outstanding provision on account of COVID now stands at INR 600 crore.*
The Profit after Tax for Q1 FY21 is reported at Rs. 94 crore as compared to Loss of Rs. 617 crore for Q1 FY20
Asset Quality- Gross NPA of the Bank reduced to 1.99% as of June 30, 2020, as compared to 2.60% as of March 31, 2020. ▪ Net NPA was 0.51% as of June 30, 2020, as compared to 0.94% as of March 31, 2020. ▪ As of June 30, 2020, the Gross NPA % of the Retail Loan Book was at 0.87% as compared to 1.77% as of March 31, 2020 and Net NPA % of the Retail Loan Book of the Bank was at 0.24% as compared to 0.67% as of March 31, 2020. *The Provision coverage ratio on NPA accounts improved to 74.93% at June 30, 2020 as compared to 49.76% at June 30, 2019 and 64.53% at March 31, 2020.*
*Moratorium Book Details- . For the second phase, till date, the Bank has provided moratorium to about 28% of its customers based on the value, out of which 23% is in retail assets including rural portfolio and 35% is in the wholesale financing portfolio. CEO comments on morat book- " we have liberally provided moratorium to customers who sought it, and our moratorium was about 45% last quarter. This has reduced to 28% now, which we expect to fall below 10% by August 31, 2020 based on the strong improving trend in collections we are experiencing"*
Disbursement trend- Retail disbursals were significantly impacted, especially during the month of April and May 2020, because of COVID-19 pandemic and related lockdown throughout the country. However, during June 2020, the disbursal revived once the lockdowns were relaxed up to an extent and has been in an improving trend since then
Capital Adequacy Parameters- As of June 30, 2020, the Net Worth of the Bank was Rs. 17,436 crore and the Book Value per share was Rs. 30.74. ▪ Capital Adequacy of the Bank is strong at 15.03% with CET-1 Ratio at 14.58% as of June 30, 2020 as compared to Capital Adequacy Ratio of 13.38% and CET-1 Ratio of 13.30% as of March 31, 2020.
JMFS Mid Cap Research