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Business News/ Markets / Stock Markets/  IDFC First Bank share price falls over 5% after Q4 net profit dips on higher provisions. Time to buy?
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IDFC First Bank share price falls over 5% after Q4 net profit dips on higher provisions. Time to buy?

IDFC First Bank’s net profit in Q4FY24 declined by 10% to ₹724 crore from ₹803 crore in the year-ago quarter, dragged by a substantial rise in provisions.

IDFC First Bank's Net Interest Income (NII) for the quarter grew 24% to ₹4,469 crore from ₹3,597 crore, YoY.Premium
IDFC First Bank's Net Interest Income (NII) for the quarter grew 24% to 4,469 crore from 3,597 crore, YoY.

IDFC First Bank share price traded over 5% lower on Monday after the private lender announced its financial results for the fourth quarter of FY24. IDFC First Bank shares declined as much as 5.64% to 80.05 apiece on the BSE.

IDFC First Bank’s net profit in Q4FY24 declined by 10% to 724 crore from 803 crore in the year-ago quarter, dragged by a substantial rise in provisions. 

The lender’s provisions increased 50% from 482 crore in Q4FY23 to 722 crore in Q4FY24.

Net Interest Income (NII) for the quarter grew 24% to 4,469 crore from 3,597 crore, YoY.

Core Pre-Provisioning Operating Profit (PPOP) for the quarter grew by 22% YoY to 1,632 crore in Q4 FY24. 

Read here: IDFC First Bank Q4 Results: Profit plunges 10% to 724 crore, NII rises 24%

On the asset quality front, gross non-performing assets (NPA) improved by 16 bps to 1.88% as of March 31, on a sequential basis. Net NPA improved by 8 bps QoQ to 0.60%.

IDFC First Bank guides for some growth moderation but margins are likely to remain largely stable aided by improving portfolio mix. The bank would maintain focus on building a strong retail deposit book and healthy CASA. It expects cost-income ratio, which has been relatively sticky, to moderate as the burn-rate in the new business recedes. 

The lender expects credit cost to stay high, as it shores up provisions further. 

Read here: ICICI Bank: Brokerages remain bullish on stock post Q4 earnings; raise target price

“IDFC First Bank’s CET 1 ratio has slipped to 13.4% due to added risk weights on Cards/Personal Loan book and its higher growth rate, which we believe would call for capital raise in FY25. Factoring-in the relatively sticky operational cost and higher LLP, we cut FY25E and FY26E earnings 13% and 6%," said Anand Dama, Senior Research Analyst, Emkay Global Financial Services.

He expects IDFC First Bank to deliver RoA and RoE at ~1.2% - 1.3% and 11% -13% in FY25 - FY26E. 

The brokerage retained its ‘Add’ rating and IDFC First Bank share price target of 98 per share, valuing the bank at 1.8x FY26E ABV.

Motilal Oswal said IDFC First Bank delivered a mixed quarter, with earnings being largely in line, but provisioning and opex were elevated. Net interest margin contracted 7 bps QoQ; however, the outlook remains broadly stable. 

Also Read: Maruti Suzuki share price gains over 2% after Q4 results; Should you buy, sell or hold the stock?

Improvement in operating leverage mainly from 2HFY25 onwards coupled with steady loan growth, limited deposit repricing, and further replacement of high-cost borrowings in FY25 will support IDFC First Bank’s underlying profitability, Motilal Oswal added.

It estimates the bank to deliver ~30% earnings CAGR over FY24-26, with RoA/RoE reaching to 1.3%/13.2% in FY26. 

The brokerage firm reiterated its ‘Neutral’ rating and raised IDFC First Bank share price target to 88 per share.

At 10:50 am, IDFC First Bank shares were trading 4.57% lower at 80.96 apiece on the BSE.

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Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.

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Published: 29 Apr 2024, 10:51 AM IST
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