IDFCFIRSTB - IDFC FIRST BANK LIMITED Share Price

Management's outlook for IDFC FIRST Bank emphasizes a strong foundation built on capital and deposits, aiming for significant growth in the coming years. They reported a total balance sheet size of INR 3.6 lakh crores, with customer deposits exceeding INR 2.57 lakh crores, marking a 26% year-on-year increase. Retail deposits have also crossed INR 2 lakh crores. The cost of funds decreased to 6.42%, while the cost of deposits was at 6.37%. The credit-to-deposit ratio improved to 93.4%, with a goal to lower it into the early 80s in the upcoming years.

Important forward-looking points include:

1. Management expects approximately INR 7,500 crores from a capital raise to conclude in Q2, enhancing their capital position, which is currently at 15.01%.
2. NIM (Net Interest Margins) for the coming quarters is projected to stabilize around 5.8%, with a potential recovery expected in Q4 as the impact of rate cuts is factored in.
3. The bank maintains a credit cost guidance of about 2-2.05% for the fiscal year, considering expected improvements in asset quality excluding microfinance.
4. Management noted that they would focus on reducing the expense ratio while improving operational efficiency, with a long-term goal of reaching a cost-to-income ratio of 65% by FY '27.
5. Despite short-term pressures from reduced high-yield microfinance, management remains optimistic about scaling retail and MSME portfolios while ensuring robust underwriting standards.

Overall, management is building confidence in IDFC FIRST Bank's long-term growth strategy and maintaining a focus on sound economic fundamentals.

Q1: Just on Slide 52, thank you for giving the breakup of the slippages. Just wondering what is the like-for-like number on the -- other than MFI slippage in first quarter of FY '25?

A1: The slippages excluding MFI were INR1,972 crores for the current quarter. Compared to last quarter, we saw an increase of about INR350 crores. This increase can largely be attributed to seasonality, which typically affects Q1. It's difficult to single out specific product lines responsible for this increase.

Q2: If we see across product segments this quarter, there is an increase in the NPA levels and also the SMA levels. Anything specific you want to highlight?

A2: We did observe a general increase in NPAs, particularly in the rural segment in certain states like Karnataka. However, we are also seeing improvements in collection efficiency in these areas, so we are not particularly concerned at this time. Our slippage ratio has only marginally increased compared to the last four quarters, so we remain watchful but not overly alarmed.

Q3: Your thoughts on unsecured MSME; there is a rising delinquency here. Any comments?

A3: We are seeing credit costs in the unsecured MSME segment that are generally aligned with the overall credit cost, around 2%. While there has been an increase in delinquency, it isn't material and is consistent with our previous guidance. The overall performance remains stable despite the challenge posed by microfinance.

Q4: How to think about margins from this quarter onwards given MFI decline and funding cost actions?

A4: We expect some impact on margins in Q2 due to rate transmission effects, but we anticipate benefits from the reduction in fixed deposit rates in subsequent quarters. By Q4, we believe margins should recover to levels similar to Q1. Our expectation is contingent on any further rate cuts.

Q5: On your capital raising of INR7,500 crores, do you expect any risks for delays from the investor side?

A5: At this point, we do not foresee any risks from investors or delays in raising the capital. We are confident that the transaction will proceed smoothly as expected.

Q6: Guidance on credit cost for FY '26; where do you see it settling?

A6: We anticipate our credit cost for FY '26 to settle around 2% to 2.05%. This guidance remains consistent, and we see nothing material affecting this outlook at present.

Q7: Can you explain the rationale behind your significantly lower deposit rates compared to competitors?

A7: We strategically reduced our fixed deposit rates to a level aligned with larger banks, resulting in a structural cost benefit that will be reflected over time. Our goal is to manage deposit rates effectively while still attracting customers, which ultimately helps us maintain a healthy balance sheet.

Q8: What do you expect for NIMs moving forward?

A8: We are projecting NIMs to stabilize around 5.8% by Q4, as the fixed deposit reductions materialize, but we do expect some volatility in Q2 due to the current environment and existing pricing on loans. Overall, the trend should be upward as we control costs and reprice our deposits effectively.