IDFC First Bank Limited Q3 FY22 Earnings Conference Call Insights

Key highlights from IDFC First Bank Limited (IDFCFIRSTB) Q3 FY22 Earnings Concall

Management Update:

• The bank tripled the number of bank branches from 206 to 599 and grew the ATMs more than 6 times from 112 to 727.

Q&A Highlights:

• Kunal Shah from ICICI Securities asked about cost to income and how it’s panning out. V. Vaidyanathan CEO said it should come down. It increased as the bank had start-up costs for branches and ATMs etc. Also the bank’s asset products are relatively higher cost of products. The bank added that though the bank’s cost structure is relatively high but the company expects cost to income should begin to come down.

 

• Kunal Shah from ICICI Securities also asked about the slippage run rate overall, which saw a decline. Sudhanshu Jain, CFO commented that the company saw the overall net slippage coming down by 25% compared to previous quarter on the retail front and on the overall there was a toll account that slipped into NPA in the current quarter.

 

• Ishan Agarwal with Erevna Capital asked that if the NII for the quarter included the interest income for the telecom account for the prior periods or it’s the core net interest income. Sudhanshu Jain, CFO answered that interest income for the quarter includes income on the telecom account for the prior period. Also added that the quantum of the prior period income added in NII would be about INR100 crores.

 

• Ishan Agarwal with Erevna Capital also enquired about the blended retail yield for the retail book for Q3. Sudhanshu Jain, CFO answered that the incremental yield can be assumed at about 14.5-15% on the retail book. This number is expected to be slightly lower for FY23-24 as the bank is focused more on prime home loans and doing well in that.

 

• Ishan Agarwal with Erevna Capital also asked if the bank is confident of crossing the 6% mark on NIM sooner. V. Vaidyanathan CEO said that it should inch up and between 5.9% and 6% is not a big gap to fill.

 

• Prakhar Agrawal from Edelweiss asked what was the gross slippage number, recovery and write off for Q3 and the previous quarter. Sudhanshu Jain CFO said the gross slippage was that which includes the one toll account that came in, in 3Q of INR248 crores. Excluding that the gross slippage was about INR1,200 crores.

 

• Prakhar Agrawal from Edelweiss also enquired that in terms of consumer loans, what’s included in the portfolio. V. Vaidyanathan CEO said that on the consumer it’s largely personal loans to salaried people, digital loans, consumer durables and those kind of products.

 

• Subrat Dwibedy from SBI Life Insurance enquired about the wholesale accounts, what’s the BBB or below BBB numbers. Sudhanshu Jain CFO said that on the wholesale, the book is very pristine and that’s getting reflected in the improvement in the rating mix. On an external rating basis, more than 79% of the book is rated A and above and based on internal rating about 80% is rated A and above, excluding the infrastructure book. Therefore, A and above is 79% and BBB and below is 21%, including wholesale and infra.

 

• Aditya Singhania with ENAM Holdings asked about the breakup of provision line item and fee income. Sudhanshu Jain CFO said that in terms of provision for 3Q, it was about INR392 crores. In the quarter, the bank released provision of INR487 crores on Vodafone. However, IDFC increased its PCR from 52% to 57%. The company also made provisions of about INR250 crores on legacy infra and corporate accounts.

 

• Rohit Jain from Tara Capital asked about the improvement in NIM, if it was driven by lowering of funding cost or increase in the lending yield.  V. Vaidyanathan CEO said that this included a certain amount that came due to prior period of the telecom account. And in terms of yield, it has been broadly stable compared to previous quarter, it came down on a blended basis by about 10 bps. On the other hand the cost of funds came down by 20 bps during 3Q.

 

• Trimukh from B&K Securities asked that on deposits, what’s the share of top 20 depositors and what’s the average ticket size in SA and TD, also if it’s 100% sourced from branches or non-branch sources. V. Vaidyanathan CEO said that on deposit, the bank largely does sourcing through its own employees and open accounts digitally. On CASA, it has grown by 18% YoY and average CASA grew by 29%. The ticket size is of about INR80,000-100,000 or a little more when accounts are opened.

 

• Trimukh from B&K Securities also queried if the company has ECLGS outstanding as of Q3 and has there been any slippages. Sudhanshu Jain CFO replied that ECLGS’ outstanding book is about INR1,500 crores and the company has not seen any significant credit deterioration there.