IDFC First Bank Limited Q2 FY23 Earnings Conference Call Insights

Key highlights from IDFC First Bank Limited (IDFCFIRSTB) Q2 FY23 Earnings Concall

Management Update:

• [00:09:20] IDFCFIRSTB said it expects its operating profit at a YtoY level to increase at least 50% over last year, while on a QonQ basis, even healthier than that.

Q&A Highlights:

• [00:19:43] Bhavin Gala from Marine Capital asked about the retail banking operation performance in 2Q23. V. Vaidyanathan MD replied that it sold the SR and got INR200 crores of provision relief. This relief was taken to retail and it’s showing in the retail line.

• [00:22:43] Ishan Agarwal of Erevna Capital enquired about the annualized credit loss for 2Q23 for retail plus commercial book. V. Vaidyanathan MD answered that it’s not disclosed, but overall it’s 1.2% and for 1H23 it’s 1.1%.

• [00:24:49] Ishan Agarwal of Erevna Capital asked about the reason for cost to income ratio increasing from 1Q23 to 2Q23. V. Vaidyanathan MD answered that there are lot of moving parts, but broadly the cost to income ratio of IDFCFIRSTB will trend downwards from here. Also on a YoY basis, things will be down from here on.

• [00:32:16] Nitin Aggarwal with Motilal Oswal queried that with margin expansion in 2Q23, how incremental spreads and margins are trending in coming quarters. Sudhanshu Jain CFO answered that IDFCFIRSTB will be able to maintain margins comfortably around 6% mark. In 2Q23 the bank was at 5.98%.

• [00:34:23] Nitin Aggarwal of Motilal Oswal asked about the reason for consumer loan portfolio being flat in 2Q23. Sudhanshu Jain CFO replied that the bank has sold about INR333 crore of loans during 2Q23. And also in summer consumer durable sales were also strong.

• [00:36:42] Lalit Deo from Equirus Securities asked about the broad range of interest paid on refinanced borrowings and tenure of the borrowings. Sudhanshu Jain CFO replied that the bank did some additional refinance borrowing during 2Q23 due to it being of longer tenure and rates were relatively better.

• [00:39:52] Lalit Deo with Equirus Securities enquired about the share of salaried customers in the home loan portfolio and how has it changed. V. Vaidyanathan MD answered that it would probably be about 55-60% being salaried.

• [00:47:13]  Sahil Sharma from SS Capital asked about the credit risk team on the retail side as in banking the most important thing is to get the money back. V. Vaidyanathan MD said that it’s not hiring so much of credit managers any more. Most of that work is taken care by machines, AI/ML etc.  Now the skill levels of people the bank is looking for is of even higher order.

• [00:56:36] Sagar Shah of Phillip Capital asked about the key drivers for further traction in ROE and ROA. V. Vaidyanathan MD answered that it’s the scale that’s driving ROE.

• [00:57:25] Sagar Shah of Phillip Capital also asked if the bank is seeing the average cost of deposits and borrowings peaking out in 2Q23 and going ahead. Sudhanshu Jain CFO replied that average cost for 2Q for the bank was about 5.5%, that’s 25 bps higher than previous quarter. IDFCFIRSTB is not seeing substantial increase going forward.