IDFC First Bank Q3 Results Review - Higher Provisions Dent Earnings; Cost Ratios Stay Elevated: Motilal Oswal

Motilal Oswal Report

IDFC First Bank Ltd. reported Q3 FY24 profit after tax of Rs 7.2 billion (up 18.4% YoY, 8% miss) due to higher provisions and opex.

Net interest income grew 30.5% YoY, led by healthy loan growth and improvement in margins (up 10 basis points QoQ at 6.42%). Other income grew 31.6% YoY to Rs 15.2 billion. Opex grew 33.5% YoY to Rs 42.4 billion, resulting in a 115 bp QoQ increase in the cost/income ratio to 73.1%.

IDFC First Bank's loan book (including credit subs) grew 27%YoY/4.2% QoQ. Deposit growth was robust at 37% YoY, with current account and savings account mix increasing 40 bp QoQ to 46.8%.

We estimate the bank to deliver a ~30% earnings compound annual growth rate over FY24-26, with return on asset/return one equity of 1.3%/13.5% in FY26. Maintain 'Neutral' with a revised target price of Rs 85.

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