Shares of IDFC First Bank surged nearly 14 percent in intraday deals on Monday after the private sector bank reported its highest ever net profit in the June quarter. Positive management commentary, as well as bullish views from brokerages, also lifted the sentiment.
In the June quarter, the bank recorded its highest-ever net profit at ₹474.33 crore as against a net loss of ₹630 crore in the same quarter a year ago. Its net interest income (NII) also jumped 26 percent YoY to ₹2,751.1 crore, while the net interest margin rose 39 bps YoY to 5.89 percent.
Its asset quality also improved. Both GNPA and NNPA rose 125 bps and 102 bps to 3.36 percent and 1.30 percent, respectively, on a YoY basis.
Just in July, the stock advanced over 19 percent, however, it gave negative returns in the previous six months (January to June) in 2022. In the last 1 year, the stock has shed nearly 30 percent.
The stock jumped as much as 13.7 percent to hit its day's high of ₹42.7 in intraday deals. It ended 11.8 percent higher at ₹42 as against a 0.95 percent (545 points) rise in Sensex at 58,115.
Post the earnings, V Vaidyanathan, Managing Director and CEO of the bank said, “We have built a strong foundation for the bank, on the basis of which we can grow the loan book, deposits and profits comfortably from here on in a steady manner."
"We have posted the highest-ever profit after tax of ₹474 crore in Q1FY23. Our return on assets has nearly touched 1 percent and we expect it to rise from here. We are happy that even post the pandemic, our retail Gross NPA and Net NPA have reverted to 2.1 percent and 0.9 percent, respectively which is our long-term experience. More importantly, the retail asset quality has normalized sooner than our earlier guidance of March 2023," he added.
Global brokerage house CLSA also upgraded the stock to 'outperform' from 'underperform' post the earnings. It also raised its target price to ₹41 from ₹34 earlier. However, even the new target price does not indicate any potential upside in the stock.
IDFC First reported healthy June quarter results as loans grew 7 percent QoQ driven by growth in its retail asset, said CLSA.
"The bank is seeing healthy momentum in its core business driven by growth in both traditional focus segments like consumer and auto loans as well as newer focus segments like mortgages and credit cards," it added.
CLSA raised its FY23 (calendar year) EPS for the stock by 2 percent building in lower credit costs offset by lower treasury income. However, it cut FY24-25CL estimates by 3-5 percent mainly driven by higher Opex estimates.
While the bank has a relatively high-cost structure, which constrains its ROE (return on equity), it is also one of the highest growth banks in terms of both advances growth and PPOP, said the brokerage. Further, risk-reward has improved over the past year as it has underperformed the Bank Nifty by 36 percentage points, it noted.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.