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IDFC Bank: Targeting 10 million Customers by Financial Year 2020 - Views on News from Equitymaster
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  • May 4, 2017 - IDFC Bank: Targeting 10 million Customers by Financial Year 2020

IDFC Bank: Targeting 10 million Customers by Financial Year 2020
May 4, 2017

IDFC Bank declared its results for the fourth quarter of the financial year 2016-17 (4QFY17). The bank posted a 22.5% YoY growth in interest income and 7% growth in profit during the quarter. Since the bank commenced its banking operations on 1st October 2015, the year-on-year performance for the FY17 is not strictly comparable. Here's our analysis of the results.

Performance summary
  • Interest Income grew by 22.5% YoY in 4QFY17 on an 8% YoY growth in net advances and a 451% jump in net credit investments.
  • As interest expense also grew at the same pace, net interest income was up by 20.5% on a YoY basis to Rs 5 bn in 4QFY17.
  • NIMs (net interest margin) contracted to 2% in 4QFY16 mainly due to fall in the non-loan segment NIMs. For FY17, the NIMs stood at 2.1%.
  • Backed by a 401% jump in fee and commission, non-interest income grew by 60% YoY in 3QFY17.
  • The cost-to-income ratio increased to 53.4% in 4QFY17 as compared to 53.1% in the 4QFY16 due to steep rise in other operating expenses. The employee cost reduced by 30% to Rs 948 million during the quarter. For FY17, the cost-to-income ratio increased by 1.3% YoY to 42.1% mainly on account of bonus provision in all first three quarters.
  • The asset quality, after slipping to 7% in the December 2016 quarter due to one-off deterioration in the non-legacy corporate loan book, recovered to 6.2% in the March 2017 quarter. The net bad loans ratio stood at 2.4% at the end of March 2017 quarter. The bank is confident that provisioning on the legacy stressed asset book remains sufficient.
  • The bank sold 14 assets of gross value of Rs 40 billion in the March 2017 quarter. Resultantly, its stressed assets portfolio fell to Rs 50 billion.
  • Although provisioning fell by 60% YoY during the quarter, as other income earned during the quarter was down 59%, net profit declined by 6.6% YoY during the quarter.
  • Capital adequacy ratio stood at 18.9% of which Tier I capital adeqaucy ratio stood at 18.5% at the end of 4QFY17.
  • The bank has proposed a dividend of Rs 0.75 per equity share of face value of Rs 10 each translating into a dividend yield of 1.1% at present price levels.

    Financial snapshot
    Rs (m) 4QFY16 4QFY17 Change FY16 FY17 Change
    Interest income 18,155 22,234 22.5% 36,488 85,327 133.8%
    Interest expense 13,987 17,213 23.1% 28,015 65,154 132.6%
    Net Interest Income 4,168 5,021 20.5% 8,473 20,173 138.1%
    Net interest margin (%) 2.20% 2.00% 2.3% 2.2%
    Other Income 1,377 563 -59.1% 4,032 10,131 151.3%
    Other Expense 2,947 2,981 1.2% 5,106 12,770 150.1%
    Provisions and contingencies 119 48 -59.7% 242 2,825 1068.2%
    Profit before tax 2,479 2,555 3.0% 7,158 14,710 105.5%
    Tax 829 795 -4.1% 2,489 4,512 81.3%
    Profit after tax/ (loss) 1,651 1,760 6.6% 4,669 10,197 118.4%
    Net profit margin (%) 9.1% 7.9% 12.8% 12.0%
    No. of shares (m) 3,399
    Book value per share (Rs)* 43.2
    P/BV (x) 1.53
    * (Book value as on 31st Mar 2017)
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