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IDFC First Bank Q4 Results Review - Beat Across Parameters; Growth Momentum To Continue: Axis Securities

Stable asset quality to keep credit costs within guided range.

<div class="paragraphs"><p>An IDFC First Bank branch. (Source: BQ Prime)</p></div>
An IDFC First Bank branch. (Source: BQ Prime)

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Axis Securities Report

IDFC First Bank Ltd. reported robust loan growth momentum (up 22% YoY/ 3% QoQ) in Q4 FY23, primarily driven by home loans (up 39% YoY/ 10% QoQ), wheels (up 34% YoY/ 7% QoQ) and rural finance (up 48% YoY/ 18% QoQ) with significant growth across the segments.

Healthy growth in advances and net interest margin at 6.41% aided net interest income growth of 35/20% YoY/QoQ.

Other income reported strong growth of 68/32% YoY/QoQ, largely led by growth in the fee income from the bank’s retail products. However, there was a gain of Rs ~200 crore on the redemption of venture capital investment which is one-time in nature.

With opex moderating, pre-provision operating profit reported strong growth of 89/24% YoY/QoQ. Thus, with robust growth in advances and NII and reduced credit cost, the bank reported the highest ever quarterly profit at Rs 803 crore (up 134/33% YoY/QoQ).

Outlook:

We expect IDFC First Bank to maintain its growth momentum and model in credit/deposit growth of ~24/31% compound annual growth rate over FY23-25E.

While margins have been healthy, repayment of high-cost legacy loans will help the bank maintain its margins. We expect IDFC First Bank to witness return on asset expansion to ~1.3% by FY25E versus 1.1% in FY23 driven by- largely stable margins of ~6.2%, Improving opex ratios, and moderating credit costs.

Click on the attachment to read the full report:

Axis Securities IDFC FirstBank Q4FY23 Result Update.pdf
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