IDFC First Bank announced its first quarter results on the 31st of July disclosing a net loss of Rs 630 crores down from a profit of 94 crores in Q1FY21. The Total income, net of interest expense, for the bank grew 36% YoY and Net Interest Income grew 25% YoY and 11% QoQ. The Net interest margins have strengthened consistently across quarters from 4.86% in Q1FY21 to 5.09% in Q4FY21 and to 5.51% in Q1FY22.
This quarter also saw the bank deliver its highest ever core pre-provisioning operating profit. The drag on profit though, was due to provisions, which have been high across the sector this quarter. The bank provided for Rs 1879 crores of provisions of which Rs 350 crores were covid specific. The Gross NPAs stand at 4.61% and Net NPAs at 2.32%. The PCR came in at 50.86%.
ET Now spoke with Mr. V Vaidyanathan, CEO & MD of IDFC First Bank, who clarified that a conservative provisioning formula has been adopted by the bank ensuring that provisions are upfronted. He believes Q2FY22 provisions will be lower than Q1FY22 and Q3 and Q4 of FY22 to be even lower than Q2.
For IDFC First retail Net NPAs, which have been the largest challenge for most banks, stood at 1.82% with the real drag being infra related NPAs at 9.84%. On this front, Mr. Vaidyanathan also mentioned that unlike several corporate loans where recoveries almost never happen, retail loans see delayed recoveries. So while, currently, these accounts may be provisioned, these provisions may see some reversing in quarters ahead.
On the asset side, gross funded assets grew 9% year on year. The bank, which is vocal about its retail transformation, saw CASA grow 98% year on year with retail assets being 64% of gross funded assets. Mr. Vaidyanathan believes that each product the bank comes out with is a differentiator in the market and that this strategy will help IDFC First take opportunities and become a bigger. He also said that the Bank is focused on the long term picture and that there could be cycles in the short-term.
On the telecom front, he said that the total exposure is roughly Rs 3200 crores with a provision of Rs 475 to Rs 500 crores. The account has a funded exposure of 25%. He believes the risks, in this regard, are well provided for.
There have also been questions surrounding divestments from the company made by Mr. Vaidyanathan. He responded saying that there were certain donations & contributions he wanted to make for which he needed to divest. Other than that, he reiterated that he remained fully invested in the bank and there was little need to read much into this.
From the results and commentary, it seems that the Bank looks to be at a very interesting inflection point and one may want to keep an eye on provisions and operational efficiency for the next few quarters.
