IDFC First Bank Q4 FY20 Financial Highlights

Introduction

IDFC First Bank in Q4 FY20 posted a net profit of Rs.72 Cr on account of a robust growth across Net Interest Income, Non-Interest Income, CASA deposits and Retail Loan Book. Also, there was a decline in provisions QoQ by almost 70%, due to which Bank’s Net Profit has come into the positive territory for the first time since the merger.

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IDFC First Bank Q4 FY20 Results Analysis

Q4 FY20 Results

IDFC
IDFC First Bank Q4 FY20 Results
Net Interest Income (NII)
  • NII is a very important parameter for analysing the core business growth of the bank.
  • Net Interest Income = (Interest Income – Interest Expenses)
  • Interest Expenses are nothing but the finance cost incurred by the company while raising funds which are going to be available for the lending.
  • Net Interest Income is increased by 40% YoY driven by :
    • Robust YoY growth in CASA deposits (162%) and Retail Term Deposits (107%)
    • Decline in Interest Expenses by 5% YoY due to 6% fall in total borrowings
    • Improved Net Interest Margin QoQ as well as YoY
Pre-provisioning Operating Profit (PPOP)
  • Operating Profit before making provisions is called as Pre-provisioning Operating Profit (PPOP)
  • PPOP = (Total Operating Income – Operating Expenses)
  • Pre-provisioning Operating Profit is increased by almost 70% YoY (Excluding Trading Gains) on account of :
    • Robust growth in NII by 40% & Operating Income by 67% YoY
    • Fall in Interest Expenses by 5% YoY
Net Profit
  • In Q4 FY20, bank has made total provisions of Rs.679 Cr up 4% YoY, out of which COVID-Related provisions were Rs.225 Cr.
  • Profit Before Tax (PBT) in Q4 FY20 was at Rs.107 Cr from a loss of Rs.417 Cr last year same quarter.
    • Bank’s financial performance has come into the positive territory for the first time in Q4 FY20 after the IDFC Bank and Capital First merger last year in Q3 FY19.
    • It is a very positive sign for the bank, that it is successfully consolidating its balance sheet and building a Retail-oriented Business Model under the visionary leadership of Mr. V. Vaidyanathan, MD & CEO IDFC First Bank.
  • Net Profit for Q4 FY20 stood at Rs.72 Cr from a loss of Rs.218 Cr in Q4 FY19. Thus, Q4 FY20 is a quarter delivering a Loss to Profit YoY.
Net Interest Margin
IDFC
IDFC First Bank – Net Interest Margin (NIM)
  • Net Interest Margin (NIM) and the asset growth, both drives the Net Interest income of the SBI cards.
  • Bank’s NIM is improving consistently QoQ post merger.
  • In Q4 FY20, NIM improved Significantly by 121 bps to 4.24% from 3.03% Q4 FY19. NIM was 3.86% in Q3 FY20.

Decoding the Balance sheet Q4 FY20

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IDFC First Bank – Balance sheet Summary Q4 FY20
Balance sheet Size
  • Bank’s balance sheet size has declined by almost 11% YoY as well as 7% QoQ on account of the targeted Retail-Oriented Portfolio Consolidation.
  • Post IDFC Bank-Capital First Merger, IDFC First Bank’s balance sheet has gone through a series of consolidation process.
  • Here, bank’s key focus is to build the Quality balance sheet with higher Retail share in Advances as well as Deposit Mix. So, in order to achieve it, there was a decline in :
    1. Wholesale Loans
    2. Wholesale Deposits
Advances
  • The Bank’s Net Loan Book aggregated to Rs.98,062 Cr as of March 31, 2020, with a decline of 8% as compared to Rs.1,06,873 Cr as of March 31, 2019.
  • Also, as far as Advances Mix is concerned, Retail Loan Book’s % share in the total Loan Book is rising consistently.
  • A year ago (in Q4 FY19), Retail Loans were 37% of Total Loan Book, while Wholesale Loans were contributing almost 63%.
  • However, as on Q4 FY20, Retail : Wholesale Loan Mix was 54% : 46%. It is mainly because of the Banks’s primary focus of building a Retail-Oriented Business Model and to Make IDFC First Bank a purely Retail-oriented Bank.
Deposits
  • Bank’s deposits aggregated to approximately Rs.65,108 Cr as of March 31, 2020, a decline of 8% as compared to Rs.70,479 Cr as of March 31, 2019.
  • A robust growth is seen in CASA deposits which are at Rs.20,661 Cr in Q4 FY20 from Rs.7,893 Cr in Q4 FY19, thus grew by 162% YoY.
  • CASA ratio stood at around 31.9% as of March 31, 2020, as compared to 11.4% as of March 31, 2019 and 24.1% as of December 31, 2019.
  • As you can see in the above table, CASA Ratio is improving consistently quarter-on-quarter, which is a key driver of the subdued interest expenses YoY.

Asset Quality

IDFC
IDFC First Bank – Asset Quality
  • Gross non-performing assets (GNPA) improved by 23 bps QoQ to 2.60% in Q4 FY20 from 2.83% in Q3 FY20. If YoY Gross NPA numbers are compared, it is slightly eroded by 17 bps YoY, from 2.43% in Q4 FY19 to 2.60%.
  • Net NPA is also improved by 29 bps from 1.23% in Q3 FY20 to 0.94% in Q4 FY20. While there is an improvement by 33 bps YoY from 1.27% in Q4 FY19 to 0.94% in Q4 FY20.
  • In accordance with the COVID-related uncertainties, bank’s Provision Coverage Ratio is increased to 64.53% in Q4 FY20 from 48.18% in Q4 FY19 and 57.34% in Q3 FY20.

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