IDFC First Bank Q1 results: Covid provisioning leads to ₹630 cr net loss, asset quality dips
3 min read 31 Jul 2021, 06:43 PM ISTCovid provision pool increased from ₹375 crore to ₹725 crore during the current quarter on a prudent basis to act as a cushion for Covid impact, IDFC First Bank said
PremiumIDFC First Bank reported a net loss of ₹630 crore for the quarter ended June 30, 2021, due to provisioning measures for weathering the impact of the second wave of the Covid-19 pandemic. The private-sector lender had registered a net profit of ₹93.55 crore in the year-ago period and that of ₹127.81 crore in the previous quarter ended in March 2021.
"Net loss of ₹630 crore for Q1FY22 is because of prudent provisions for Covid wave 2.0. Covid provision pool increased from ₹375 crore to ₹725 crore during the current quarter on a prudent basis to act as a cushion for Covid impact," IDFC First Bank said in a statement.
Overall provisions increased 146 per cent to ₹1,879 crore in the first quarter of this fiscal from ₹764 crore in the corresponding quarter of last fiscal.
IDFC First Bank said that it expects to collect a reasonable proportion of these dues in due course.
"There was no moratorium provided to customers during Covid second wave and thus there was ageing provisions that were required to be taken as per our conservative provisioning norms. The Bank believes that these provisions may not reflect actual economic loss but represent a delay in timing of repayments," the bank said in a regulatory filing.
Operating income (net of interest expense) grew 36 per cent on annual basis to ₹3,034 crore in Q1 FY22 from ₹2,229 crore in Q1 FY21. This growth was driven by the growth in net interest income (NII) and fee income.
IDFC First Bank saw its NII increase 25 per cent year-on-year to ₹2,185 crore from ₹1,744 crore in the year-ago period. The lender claimed it saw said its net interest margin (NIM) - the difference of interest earned and expended - rise to the highest-ever level of 5.51 per cent during the quarter under review. The NIM was 4.86 per cent in the year-ago quarter.
On the asset front, bank's gross and net non-performing assets (NPAs) were at 4.61 per cent and 2.32 per cent respectively as of June 30, 2021. The NPA ratios were up from 1.99 per cent and 0.51 per cent respectively, from year ago period.
"The GNPA and NNPA include impact of 84 bps (basis points, which is one hundredth of a percentage) and 71 bps respectively on account of one Mumbai based infra toll account which slipped during the quarter. The bank expects no material economic loss in this account eventually as this is an operating toll road and is only delayed," the bank said.
Bank deposits grew by 36 per cent to ₹84,893 crore, while the retail loan book increased to ₹72,766 crore from ₹56,043 crore on-year in June quarter. The year-on-year growth of the retail loan book was 27 per cent, excluding Emergency Credit Guarantee Line loan book of ₹1,645 crore. However, it declined by 1.2 per cent on a sequential basis. The wholesale loan book fell by 15 per cent to ₹34,232 crore from ₹40,275 crore during the quarter.
Capital adequacy ratio stood at 15.56 per cent with CET-1 (common equity tier-1) ratio at 14.86 per cent. Average liquidity coverage ratio (LCR) was at 166 per cent for Q1FY22.
"Within just two years we have made tremendous progress at the bank. Our CASA (current account savings account) ratio is high at 50.86 per cent despite reducing savings account interest rates by 200 bps recently, which points to the trust customers have in our bank and service levels," said V Vaidyanathan, Managing Director and CEO, IDFC First Bank
"Because of our low cost CASA, we can now participate in prime home loans business, which is a large business opportunity," he added.
Regarding the loss during the quarter, he said the bank has made prudent provisions for Covid second wave.
"We expect provisions to reduce for the rest of the three quarters in FY22. We guide for achieving pre-Covid level gross and net NPA, with targeted credit loss of only 2 per cent on our retail book by Q4FY 22 and onwards, assuming no further lockdowns," he said further.
(With PTI inputs)
