IDFC First Bank Q4 Results Review - Treasury Gains Boost Earnings; Outlook Remains Healthy: Motilal Oswal
Asset quality continues to improve.
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Motilal Oswal Report
IDFC First Bank Ltd. reported a profit after tax of Rs 8 billion (25% beat, up 134% YoY) in Q4 FY23, boosted by trading gains of Rs 2.2 billion. Net interest income grew by 35% YoY, with margins expanding 5 bps QoQ to 6.41%.
Business growth remained strong as the loan book was driven by healthy growth in commercial finance retail loans. The wholesale book declined 6% YoY. Deposits grew at a healthy 37% YoY, with current account and savings account deposits up 8% QoQ. Thus, the CASA ratio stood strong at ~50%.
IDFC First Bank is entering a phase of strong loan growth as the drag from the wholesale book continues to moderate. This will be aided by a strong pickup in profitability due to the replacement of high-cost borrowings, better cost trends and controlled credit costs.
We thus estimate a 31% earnings compound annual growth rate over FY23-25 and return on asset/return on equity of 1.3%/13.5% in FY25.
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