CASA deposits grow 142% YoY; CASA% reaches 40.4%; Retail advances up 25%; NIM at 4.57%
MUMBAI: The Board of Directors of IDFC FIRST Bank, in its meeting held today, approved the combined audited financial results for the quarter ended September 30, 2020.
BUSINESS & FINANCIAL PERFORMANCE OF THE BANK
Profit After Tax: The Profit after Tax for Q2 FY21 is reported at Rs. 101 crore as compared to Loss of Rs. 680 crore for Q2 FY20. The Profit after Tax for the half-year ended September 30, 2020, is reported at Rs. 195 crore. Thus the Bank reported three consecutive quarters of profitability.
Net Interest Income (NII): Net Interest Income (NII) grew by 22% Y-o-Y to Rs. 1,660 crore, up from Rs. 1,363 crore in Q2 FY20. Despite the COVID-19 pandemic impact, the Q-o-Q NII grew by 2%.
Net Interest Margin (NIM%) (quarterly annualized): NIM% rose to 4.57% in Q2 FY21 from 3.43% in Q1 FY20 and 4.53% in Q1 FY21.
Fee and Other Income (without trading gains): It decreased 19% to Rs. 291 Crore in Q2 FY21 as compared to Rs. 359 crore in Q2-FY20 due to lower loan originations and reduced banking activity on account of COVID-19 pandemic. However, sequentially, the Fee Income has shown significant improvement, up by 97%, as the economic activities are coming back on track post the phased unlock throughout the country. The trading gain for Q2-FY21 was at Rs. 337 crore.
Total Income (net of Interest Expense): It grew by 21% at Rs. 2,288 crore for Q2-FY21 as compared to Rs. 1,884 crore for Q2-FY20.
Release of Provisions on account of large telecom account: As of 30 June 2020, the Bank carried Rs. 1,622 crore of provisions, which were done proactively in Q3-FY20, against a large telecom exposure of Rs. 3,244 crore (Rs. 2,000 crore funded exposure through NCDs maturing in Dec-2021 / Jan-2022 and Rs. 1,244 crore of non-funded exposure through Bank Guarantee) as there were adverse comments around the future of the Company.
After the verdict of the Honourable Supreme Court on September 1, 2020, our assessment is:
1. The payment of AGR dues have been staggered which helps the Company with immediate cashflow. The DoT has allowed telecom operators to defer spectrum related payments due for two years (FY21-FY22) and pay it in instalments over next 10-14 years provided the operators arrange incremental BGs covering such payments.
2. Post AGR judgement, the Company has obtained approval from Board/ Shareholders to raise up to Rs. 25,000 crore through mix of debt (incl. convertible, hybrid instrument) and equity.
3. The Company has met all the borrowing obligations, including payment of Rs. 2,875 crore of NCDs in July 2020.
4. Subsequent to the SC decision on September 1, 2020, there have been trades in the NCDS issued by the Company maturing in January 2022 at a price of Rs. 80.5 to Rs. 81.7, i.e. a discount of ~19%.
Considering the positive outcome of AGR verdict and moratorium as described above, fund raising plan, repayment record and the recent trades, the Bank has released 50% provision out of Rs. 1,622 crore of provisions held as of June 30, 2020. The Bank continues to hold at Rs. 811 crore of provisions for the total exposure of Rs. 3,244 crore (25% PCR) on this telecom account as of September 30, 2020, as a prudent measure.
Provisions: The provision for Q2-FY21 was at Rs. 676 crore as compared to Rs. 489 crore for Q2 FY20 and as compared to Rs. 764 crore in Q1 FY21.
Provisions for COVID-19 impact: As of 30 June 2020, the Bank carried Rs. 600 crore of provisions towards COVID-19 pandemic & related moratorium driven impact on its lending portfolio. As described above, Rs. 811 crore of provision was released from the existing provision done on a telecom player and has been utilized now to create additional provisions for COVID19 as a conservative measure. With this, during Q2-FY21, the Bank has taken additional provision of Rs. 1,400 crore towards COVID-19 to strengthen its balance sheet further. Including this, as of 30 September 2020, the Bank holds such provision of Rs. 2,000 crore which is 2.21% of its standard advances.
Liabilities – Strong and Steady growth
Loans and Advances – stable with growing retail %
Operations & Product Launches during the last quarter
Capital and Liquidity Position
Mr. V Vaidyanathan, Managing Director, and CEO, IDFC FIRST Bank, said, “Since day one of the merger, our first priority was to strengthen the deposit side of the bank with stable retail deposits. We were very clear that we don’t want to grow the loan book until this is addressed. I am happy to say that the IDFC FIRST Bank CASA ratio has reached the industry’s best standards of over 40%. With the liability side firmly addressed, you will see growth in the total loan book from Q3 FY21 and onwards. I am further happy to inform you that the collection performance on retail loans has improved sharply after the lockdown has been lifted, and in fact are much stronger than earlier anticipated.”
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