IDFC First annoys investors with infra-credit that hit asset quality



IDFC First Bank LtdRussian investors were disappointed with the lender’s June results, as the bank reported a quarterly loss versus profit expectations due to late payments on a large infrastructure loan account.

A private lender’s gross bad loans rose to 4.61% of its portfolio from 4.15% in the previous quarter. Most of the problems seemed to stem from a single major infrastructure bill that sank during the quarter. The borrower was an account for toll roads in Mumbai, for which the bank has open positions. Rs 854. This slippage increased the share of NPLs in the infrastructure segment to 15% from 5.7% in the March quarter.

“This toll road bill continued to partially pay off its dues even during this quarter, which was impacted by the second wave; major outstanding issues have been reduced Rs 19 crore in the first quarter of the 22 fiscal year. The bank bears There is a reserve of Rs 154 crores in this account, “IDFC First said in a statement.

One big hit

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One big hit

Bank restructured In June 1895 crore loans were issued, or 2.01% of the loan portfolio. However, during the quarter, the bank did not loosen the terms of its loan agreements through amendments.

In fact, in addition to damage to infrastructure, bad loan ratios have been consistently declining. The bad loans ratio to individuals fell to 3.86% in the June quarter from 4.01% in the previous quarter. The bad loans ratio in the corporate loan portfolio fell to 2.91%.

However, this does not help the bank to have a modest 51% reserve coverage ratio, as the lender is vulnerable to future stresses.

While quarterly losses and rising stress should be worrisome, investors seem to see an improvement in operating performance. IDFC First Bank’s core operating profit, excluding treasury revenues, rose 8% year-on-year. The increase in margins gave a boost to net interest income, even though the loan portfolio was consistently contracting.

It should be noted that the bank’s large corporate loans consistently increased by 16%, despite the decline in all other parts of the loan portfolio.

What works for the bank is that the share of infrastructure is gradually decreasing, while the share of retail is increasing. The lender must demonstrate high quality of assets in its retail portfolio so that its ratings do not change. Amid a 7% drop since April, its shares are trading at a modest multiple of 1.5 to FY22.

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