India Ratings revises IDFC First Bank's outlook to 'stable'; reaffirms rating

IDFC First Bank said that India Ratings & Research has revised the outlook on the bank's debt instruments to 'stable' from 'negative' while re-affirming the ratings at 'IND AA+'.

India Ratings said that the outlook revision reflects the likelihood of a continued traction in granular funding, the strengthening of its retail advance portfolio, a reduction in its infrastructure book, shoring up of its operating performance and stabilising the legacy issues of the asset quality.

The agency further said that a substantial improvement in the franchise size and scale, large granular retail funding in line with higher-rated banks, consistent profitability buffers, maintaining a stable asset quality through the cycle and stronger capital buffers could be key positive rating drivers.

However, factors like higher-than-expected credit costs or a weakening of the provision cover or diluted tangible capitalisation buffers, the common equity tier-1 buffer falling below 13% (on a sustained basis), weak operating performance such as the bank posting losses in FY23, and a material decline in the pace of granularisation of deposits in its funding mix could lead to a negative rating action.

IDFC First Bank was formed by the merger of erstwhile IDFC Bank and Capital First. As on 30 September 2022, the bank has 670 branches and 812 ATMs (including recyclers) across the country. The bank has added 29 branches and 93 ATMs since 31 March 2022.

The private lender reported a net profit of Rs 555.57 crore in Q2 FY23, steeply higher than Rs 151.74 crore recorded in Q2 FY22, driven by strong growth in core operating income. Total Income jumped 33.82% to Rs 6531.03 crore in Q2 September 2022 from Rs 4880.29 crore in the corresponding quarter previous year.

The scrip rose 0.68% to currently trade at Rs 59.45 on the BSE.

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