IDFC First Bank Limited Q3 FY23 Earnings Conference Call Insights

Key highlights from IDFC First Bank Limited (IDFCFIRSTB) Q3 FY23 Earnings Concall

Management Update:

• [00:06:36] IDFCFIRSTB opened about 37 branches in 3Q23, totaling to 707 branches. The bank saw strong growth across all product segments; home loans grew by 48% YoY and wheels segment saw growth of 50%.

Q&A Highlights:

• [00:17:13] Ishan Agarwal of Erevna Capital asked if cost to income of 65% is achievable by 3Q24. Vembu Vaidyanathan CEO answered that YonY cost to income, the ratio of the bank will come down. Therefore, IDFCFIRSTB is tying itself to ROE as that’s what should be good.

• [00:19:59] Ishan Agarwal from Erevna Capital enquired about the increasing trend of the bank’s fee income growing and if there’s any one-offs in 3Q. Vembu Vaidyanathan CEO replied there are no one-offs in the quarter and clarified that the trend should continue going forward.

• [00:21:17] Sagar Shah with PhillipCapital asked about opex growing double digit in 3Q, and in FY24 and FY25 what kind of branch additions are expected. Vembu Vaidyanathan CEO replied that 13-15% ROE guidance is given for FY25. So the bank will work towards that. On branch additions, it will be about 150 a year.

• [00:24:21] Sagar Shah with PhillipCapital enquired about 6.4% NIMs for 3Q23 and if it would hold for next two years. Vembu Vaidyanathan CEO answered that it should be somewhere near that number. It’s running a little more than what’s initially guided. The company added that it’s already in the zone that it likes it to be at.

• [00:30:18] Ritika Behera of Ocean Dial asked about the outlook on credit growth for the industry. Vembu Vaidyanathan CEO said that it’s quite strong and looking good. In the markets, most banks have become conservative.

• [00:31:48] Ritika Behera of Ocean Dial enquired about the rural microfinance and corporate portfolios going forward. Vembu Vaidyanathan CEO replied that for IDFC, the homeloan business is growing well at 48% YoY. Also, MSME, with new businesses like gold, digital loans and credit card portfolio are growing well.

• [00:32:47] Ritika Behera of Ocean Dial also asked about the infra book and the asset quality aspect of the book. Vembu Vaidyanathan CEO answered that infra book is down to INR5,500 crores and NPA is high at 23% due to some cases recognized in the past. However, there’s no new additions happening.

• [00:34:37] Ritika Behera with Ocean Dial asked about CASA being different from the industry for IDFC. Vembu Vaidyanathan CEO replied that the bank has not done any movement on the rate front. IDFC is getting strong inflow of deposits.

• [00:36:46] Mohit Surana at CLSA enquired about the drivers of NIM improvement in 3Q. Sudhanshu Jain CFO replied that NIM increase was due to a repo repricing benefit that came in fully during Q3 and an increase in repo by 50 bps on October 1^st. Also, on the investments there was an increase in yield and excess liquidity got deployed.

• [00:36:57] Mohit Surana at CLSA also asked about the loan growth outlook if it’s changed from last 2- quarters. Sudhanshu Jain CFO said that the company is seeing strong buoyancy in loan growth and IDFC is comfortable with its 22-25% growth forecast for the foreseeable future.

• [00:46:53] Ashutosh Mishra from Ashika Stock Broking asked about any incremental development on credit card, how it’s playing out. Sudhanshu Jain CFO answered that the bank is seeing a strong growth with issuances doubling in 3Q23 vs. last year.

• [00:49:07] Ronak Daga from B&K Securities asked about the total provisions for 3Q23 and breakup of contingent and restructured. Sudhanshu Jain CFO clarified that total provisions was INR450 crores. And the breakup is not given. It’s a combination of provisions on NPA and some provision on restructured.

• [00:52:49] Ronak Daga from B&K Securities enquired about the breakup of MCI and fixed rate book. Sudhanshu Jain CFO replied that 40% is floating rate book, of which 60% is repo-linked and balance is mainly linked to MCLR.

• [00:53:42] Ronak Daga from B&K Securities asked about the restructured number. Sudhanshu Jain CFO said that restructuring book is 0.9% of the total funded assets that has come up by 1% that was reported in 2Q23. It’s roughly around INR1,200 crores.