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ICICI Direct Report
IDFC First Bank Ltd. reported a strong performance. Gross non-performing asset down 45 basis points QoQ to 2.51%; net non-performing asset down 17 bps QoQ to 0.86%.
Net interest income up 34.7% YoY, net interest margins up 28 bps QoQ to 6.41%, cost/income at ~68%.
Provisions up 7.2% QoQ; profit after tax at Rs 802 crore, up more than two times YoY. Funded assets up 24.4% YoY at Rs 1.60 lakh crore, retail grew 32% YoY.
Key triggers for future price performance:
Rundown of high cost legacy borrowings to improve cost of fund and aid margins. The management guided for ~5.6% margins.
As per management guidance cost-to-income ratio to be ~65% versus 70% plus (currently). A gradual decline in CI ratio will be the key driver of return on asset.
Better than industry credit growth along with steady asset quality and, thus, lower credit cost to aid earning compound annual growth rate of 33%, return on asset of ~1.5% in FY23-25.
After equity infusion capital adequacy stands at 16.8%.
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