IDFC First Bank declines as Q3 net loss widens

IDFC First Bank fell 3.75% to Rs 42.35 after the bank reported a net loss of Rs 1638.89 crore in Q3 December 2019 compared with a net loss of Rs 1538.01 crore in Q3 December 2018.

Pre-tax loss in the December quarter contracted to Rs 1623.05 crore as against Rs 2503.91 recorded in the corresponding quarter last fiscal. The loss was on account of a one-time provision towards an identified legacy telecom exposure, totaling Rs 1,622 crore for which the bank provided 50% of its exposure and provisions of Rs 110 crore towards one legacy infrastructure account. The bank has a legacy exposure of Rs 3,244 crores to this identified telecom company as of 31 December 2019, of which Rs 2,000 crore is in the form of non-convertible debentures and Rs 1,244 crore is in the form of non-funded exposure (bank guarantees) for spectrum. There has been no payment default so far from this telecom company. However, considering the financial stress in the telecom companies related to payments due to the government, the bank has taken provisioning of 50% of total exposure towards this identified telecom company which is in financial stress, during the quarter ended on 31 December 2019.

Total tax expenses stood at Rs 15.84 crore in Q3 December 2019 as compared to a tax write-back of Rs 965.89 crore in Q3 December 2018. During this quarter, the bank received favorable income tax orders relating to matter under scrutiny by tax department, which has resulted in net write-back of tax provision for earlier years of Rs 11.15 crore. Further, during period ended on 30 September 2019, the bank elected to exercise the option permitted under the Taxation Laws (Amendment) Ordinance, 2019. Accordingly, it had recognized provision for income tax for the quarter ended 30 September 2019 and has re-measured its deferred tax assets/ liability basis the revised rate of 25.17% which resulted in onetime tax impact of Rs 750.50 crore.

Total income rose 19.2% to Rs 4679.14 crore in Q3 December 2019 from Rs 3924.80 crore in Q3 December 2018.

Net interest income (NII) in Q3 FY20 grew 34% to Rs 1,534 crore from Rs 1,145 crore in Q3 FY19. Net Interest Margin rose sharply to 3.86% in Q3 FY 20 from 2.89% in Q3 FY19.

Cost to income ratio fell to 73.52% for Q3 FY20 as compared to 81.38% for Q3 FY19. Cost to income ratio indicates the profitability of a financial services company - lower the ratio, more the profitable the company. If the ratio rises from one period to the next, it means that costs are rising at a higher rate than income highlighting the potential problems in the company.

Gross non-performing assets (NPAs) stood at Rs 2511.36 crore as on 31 December 2019 as against Rs 2306.26 crore as on 30 September 2019 and Rs 1670.85 crore as on 31 December 2018.

The ratio of gross NPAs to gross advances stood at 2.83% as on 31 December 2019 as against 2.62% as on 30 September 2019 and 1.97% as on 31 December 2018.

The ratio of net NPAs to net advances stood at 1.23% as on 31 December 2019 as against 1.17% as on 30 September 2019 and 0.95% as on 31 December 2018.

Provisions and contingencies surged 1264.3% to Rs 2304.76 crore in Q3 December 2019 from Rs 168.93 crore Q3 December 2018. Provision coverage ratio of the bank was at 51% as on 31 December 2019 as compared to 47% as on 31 December 2018.

Total loan book was stable at Rs 1,06,140 crore in Q3 FY20 as compared to Rs 104,660 crore in Q3 FY19.

CASA Deposits stood at Rs. 16,204 crore as of 31 December 2019, rising 207% from Rs. 5,274 crore as of 31 December 2018. CASA ratio grew to 24.06% in Q3 FY20 from 8.68% in Q3 FY19.

V Vaidyanathan, managing director and CEO, IDFC FIRST Bank, said, "In Q3, the Bank raised Rs 6,638 crore, including Retail Term deposits and Retail CASA, leading to surplus liquidity which was used to run down wholesale deposits like corporate deposits, bonds and Certificate of Deposits. With every passing quarter, the Bank is bolstering its business fundamentals on the stated strategy. The bank has provided 50% for the legacy stressed telecom account, and it is now time to look ahead for growth."

IDFC First Bank provides a range of financial solutions to individuals, small businesses and corporates.

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