IDFC First Bank Q4 Results Review - Earnings Inline; Credit Costs Near Normalised Levels: Motilal Oswal

Motilal Oswal Report

IDFC First Bank Ltd. reported broadly in-line profit after tax of Rs 7.2 billion (down 10% YoY/up1.2% QoQ) in Q4 FY24, amid elevated provisions and higher opex.

Net interest income grew 24% YoY, led by healthy loan growth, while margins contracted 7 bp QoQ to 6.35%. Opex continued to grow at a higher pace of 29.4% YoY to Rs 44.5 billion, resulting in an elevated cost/income ratio of 72.8% in Q4 FY24.

Gross advances rose 25.1% YoY and 6.1% QoQ, while net advances rose 24.4% YoY and 4.9% QoQ. Deposits surged 39% YoY/10% QoQ, with current account and savings account mix improving to 47.2% (up 40 bp QoQ). Credit/deposit ratio thus eased to 97% (the first time below the 100% mark).

We estimate the bank to deliver ~30% earnings compound annual growth rate over FY24-26, with return on asset/return on equity reaching to 1.3%/13.2% in FY26.

Reiterate Neutral with a revised target price of Rs 88 (premised on 1.6 times FY26E adjusted book value).

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