IDFC First Bank witnessed a significant decline in its share price, dropping over 5% on Monday after the announcement of its financial results for the fourth quarter of FY24. The bank reported a net profit decline of 10% to ₹724 crore from ₹803 crore in the year-ago quarter, primarily attributed to a substantial rise in provisions.

The bank’s provisions surged by 50% from ₹482 crore in Q4FY23 to ₹722 crore in Q4FY24, while its Net Interest Income (NII) for the quarter grew by 24% to ₹4,469 crore from ₹3,597 crore on a YoY basis. Despite the decline in net profit, the Core Pre-Provisioning Operating Profit (PPOP) for the quarter increased by 22% YoY to ₹1,632 crore.

In terms of asset quality, the gross non-performing assets (NPA) improved by 16 basis points to 1.88% as of March 31, while the net NPA improved by 8 basis points QoQ to 0.60%.

Looking ahead, IDFC First Bank anticipates some growth moderation, but expects margins to remain largely stable, supported by an improving portfolio mix. The bank aims to focus on strengthening its retail deposit book and maintaining a healthy CASA (Current Account Savings Account) ratio. It foresees a moderation in the cost-income ratio as the burn-rate in new business diminishes.

However, analysts have expressed concerns over the bank’s CET 1 ratio, which slipped to 13.4%, potentially necessitating a capital raise in FY25. Despite this, analysts predict the bank to deliver RoA and RoE at approximately 1.2% – 1.3% and 11% – 13% in FY25 – FY26E.

Considering the mixed performance in the quarter, brokerage firms have varied outlooks on IDFC First Bank. While some maintain a neutral stance, others recommend cautious optimism, citing factors such as improved operating leverage and steady loan growth. Investors may consider these factors before making investment decisions.

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