Shares of IDFC First Bank rose 4.2% in Monday's trade after the bank reported a two-fold increase in its net profit for the December quarter to ₹605 crore. The private sector lender had reported a net profit of Rs.281 crore in the corresponding quarter of the last fiscal.
In the first nine months of 2022–23, the net profit of the bank increased to ₹1,635 crore from a net loss of ₹197 crore in April–December 2021–22.
During the quarter, the total income increased to ₹7,064.3 crore from ₹5,197.7 crore in the similar quarter of last fiscal. The net interest income of the bank grew by 27% YoY to ₹3,285 crore during the quarter from ₹2,580 crore in the year-ago period.
Further, the bank's asset quality improved as its gross non-performing assets declined to 2.96% in the December quarter from 3.96% in Q3FY22 and its net NPAs reduced to 1.03% in Q3FY23 compared to 1.74% in the same quarter of the previous fiscal year.
Following the strong Q3 numbers, the stock opened higher at ₹61.50 apiece during Monday intraday trade compared to the previous closing price of ₹59.35 and it continued to rise to hit an intraday high of ₹61.85. However, the stock erased those initial gains and is currently trading at ₹59.30, down by 0.08 percent.
The stock gained steam after hitting a 52-week low of ₹29.15 apiece in June last year and has skyrocketed nearly 120% in six months to December to hit a 52-week high of ₹64.3 apiece.
The stock ended in the green over the last six months, with August posting the largest gain of 30.89%, followed by July's 19.40%. In January as well, it was in the green, up by 1.62%.
Over the last one year, the stock has advanced almost 27%, rallying from ₹46.70 apiece to its current position of ₹59.30. The Nifty Bank has risen 13.26% during the same time frame.
Earlier, domestic brokerage Motilal Oswal stated that the bank has strengthened its balance sheet over the past few years as it consciously increased the mix of retail business.
"The bank is entering a phase of strong loan growth as the drag from wholesale book moderates. This will be aided by strong growth in profitability due to the replacement of high-cost borrowings, better cost trends, and controlled credit costs," said MOSL.
The brokerage also pointed out that the lender is well-positioned to benefit from a gradual rundown of its high-cost legacy borrowings over FY23–FY26E and replace them with deposits. 77 percent of such bonds will be refinanced by FY25E, and this will potentially add Rs. 750–800 crore to its NII in due course, it added.
The bank has also progressed fairly well on the liabilities front and scaled up retail liabilities at an impressive 73 percent CAGR during FY19–22. Thus, the share of retail deposits has increased to 67 percent in Q1 FY23 from 19 percent in FY19, noted the brokerage.
On the asset quality side, Motilal said that the worst of the asset quality pain is behind as the retail portfolio has been reasonably stress tested during COVID-19, while all possible stressed assets in wholesale have been recognized and well provided for.
12 analysts polled by MintGenie on average have a 'hold' call on the stock.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.
