Shares of private lender IDFC First Bank opened in the red in trade on Monday, July 28, after the bank reported a sharp drop in net profit for the quarter ended June 30.
IDFC First Bank reported a 32 percent year-on-year decline in net profit to Rs 462.6 crore for the June quarter, compared to Rs 681 crore in the same period last year. The drop was a result of slippages in its microfinance loan portfolio.
Despite the profit slump, the bank’s net interest income (NII) rose 5 percent to Rs 4,933 crore from Rs 4,695 crore in the year-ago quarter.
Asset quality deteriorated slightly during the quarter. Gross non-performing assets (GNPA) rose to 1.97 percent from 1.87 percent in the previous quarter, with total gross NPAs increasing to Rs 4,867.5 crore from Rs 4,433.5 crore. Net NPA also edged up to 0.55 percent from 0.53 percent sequentially, amounting to Rs 1,346 crore from Rs 1,230 crore.
The bank's PAT beat JPMorgan's estimates by 16 percent, as a result of higher trading income. However, the core metrics remain weak. The brokerage maintained its 'neutral' rating, with a price target of Rs 65 per share.
Domestic broking house Nuvama Institutional Equities also kept its 'hold' rating intact, with a price target of Rs 68 per share. The brokerage noted that MFI slippages and SMA reduced over the quarter, while the bank reported loan and deposit growth, even despite the MFI book decline. IDFC First Bank's NIM decline of 24 basis points QoQ was in-line and outperformed peers.
On the flip side, international brokerage Jefferies maintained its 'buy' call, with a price target of Rs 82 per share, noting that the bank's profit was marginally under its estimates as a result of higher credit costs. The non-microfinance segment saw an uptick in slippages due to soft economic conditions. Going ahead, the improvement on RoA is key.
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