IDFC first bank (NASDAQ:) (NSE:IDFC) has reported profit after tax (PAT) of Rs 7.5 billion ($100 million) in the second quarter of financial year 2024 (Q2 FY24), up 35% year-on-year. According to an analysis by Motilal Oswal (NS:), year-on-year (YoY) growth. This growth was boosted by strong revenues as net interest income (NII) increased by 32% year-on-year, driven by significant loan growth and virtually unchanged margins.
The bank’s loan book, which includes credit subsidiaries, grew by 28% year-on-year and 7% quarter-on-quarter (QoQ). Deposit growth remained strong at 39% YoY with a stable current account savings account (CASA) mix of 46.4%. Despite the promising prospect of additional credit growth, the increase in operating expenses may restrict the expansion of return on assets (ROA).
Since Motilal Oswal started coverage in October 2022, the bank’s stock has given nearly 60% returns. However, after notable outperformance over the last year, the stock now offers limited upside to a revised fair value of INR 95 ($1.27).
The bank is projected to deliver 30% compound annual growth rate (CAGR) in earnings during FY2023 to 2026, resulting in ROA/Return on Equity (ROE) of 1.33%/13.6% in FY26. Due to this estimate, its rating has been reduced to neutral amid the ongoing weakness in its wholesale book.
InvestingPro Insights
According to real-time data from InvestingPro, IDFC First Bank displays a promising financial profile with a market capitalization of $2.21 billion and a P/E ratio of 4.32. The bank’s revenue growth over the last 12 months till Q1 2024 is remarkable with a significant increase of 2,748.15%.
There are two key InvestingPro tips that match the context of the article:
1. IDFC First Bank’s revenue growth is accelerating, in line with 32% YoY growth in net interest income.
2. The bank has been consistently growing its earnings per share, indicating strong financial performance and profitability.
