Is IDFC First Bank, the next HDFC Bank?

The private sector bank came out with its Q2FY23 numbers on the auspicious occasion of Dhanteras and the numbers declared by the bank would leave you awestruck!

IDFC First Bank has soared about 46 per cent in the last six months and it has been one of the top performing banks from the Indian Private sector banks space. Interestingly, the stock is has delivered positive returns across all the time frames this year. On YTD basis the stock is up by nearly 16 per cent, in the last one-year the stock has advanced nearly 16.2 per cent returns and in the last one month the stock is has added nearly 18 per cent.

The private sector bank came out with its Q2FY23 numbers on the auspicious occasion of Dhanteras and the numbers declared by the bank would leave you awestruck!

Here are some of the key highlights of Q2FY23:

• Net Interest Income (NII) grew by 32 per cent on YoY basis to Rs 3,002 crore in Q2FY23.
• Net Interest Margin improved by 15bps on YoY basis to 5.98 per cent in Q2FY23.
• Fee and other income grew by a staggering 44 per cent YoY to Rs 945 crore in Q2FY23. Fee Income growth was contributed primarily by the fees related to loan sourcing, higher transaction led fees, distribution and wealth management fees etc. Retail fees (including toll and credit card) constitutes 92% of the overall fees for the quarter.
• Core operating income (excl. trading gains) grew by 35 per cent YoY to Rs 3,947 in Q2FY23.
• Core operating profit (excl. trading gains) jumped up 84 per cent on YoY basis to Rs 1,052 crore in Q2FY23.
• Provisions were lower by 11 per cent on YoY basis at Rs 424 crore in Q2FY23 at 1.2 per cent (annualized) of average funded assets. The Bank is well on track to meet the asset quality and credit cost guidance. Based on the improved portfolio performance indicators, the Bank is confident to achieve its FY23 credit cost guidance at lower than 1.5% of the total average funded assets.
• Net Profit jumped more than threefold on YoY basis to Rs 556 crore in Q2FY23.
• CASA Deposits grew by 37 per cent YoY to Rs 63,305 crore.
• CASA Ratio was at 51.28 per cent as of September 30, 2022.
• GNPA and NNPA of the Bank was at 3.18 per cent and 1.09 per cent respectively, QoQ improvement by 18bps and 21bps respectively.
• GNPA and NNPA of the Retail and Commercial Finance book was at 2.03 per cent and 0.73 per cent respectively, QoQ improvement by 8 bps and 20 bps respectively.

Mr. V Vaidyanathan, Managing Director and CEO, IDFC FIRST Bank, said, “We have built a strong foundation at the bank over the past three years. This includes a strong retail liabilities franchise with strong CASA ratio of 50 per cent and great service standards. Our philosophy of ethical banking and high levels of corporate governance are also our pillars. I believe we can grow from here on in a stable manner.” “Our profit after tax has grown consistently for the fifth consecutive quarter, reflecting the resilience of our franchise. I am happy to share that we have posted the highest-ever profit in the history of the Bank this quarter at Rs. 556 crore, driven by strong growth in core operating income. We are confident of sustaining this trend as the new lines of businesses launched, such as cash management, wealth management, FASTag, credit cards, are at the start of the journey and have immense potential going forward.”

With the bank’s profit after tax has grown consistently for the fifth consecutive quarter and the management is optimistic about maintaining their growth momentum on the basis of strong foundations it has built, can it blossom into the “next HDFC Bank”? Times alone can tell. But definitely one should keep the stock in one's watchlist.