Prabhudas Lilladher recommended Accumulate rating on IDFC First Bank with a target price of Rs 21 in its research report dated May 26, 2020.
Prabhudas Lilladher's research report on IDFC First Bank
IDFCFB's PPOP performance was largely in-line with our estimates but earnings remained dismal at Rs715mn (PLe: Rs951mn), despite reporting profit after five loss making quarters. 35% of bank's loan book was under moratorium as at first week of May'20 and made 26bps of LLP for all overdue loans. Few upsides in Q4 were (i) strong CASA growth of 27% QoQ moving up the ratio to 31.7%, up 810bps QoQ (ii) 40bps QoQ of NIM improvement to 4.24% led by continued mix change towards retail (grew 40% YoY) plus improvement in cost of funds due to sharp decline in bulk deposits replaced by retail and (iii) asset quality has held up especially in retail. Some niggling issues that will keep ROEs in lackluster are (i)steady asset growth as bank continues to adjust wholesale liabilities & assets, (ii)continued opex/assets on high retail focus and (iii)COVID impact on asset quality. may keep ROEs in single digits.
Outlook
We retain ACCUMULATE with revised TP of Rs21 (from Rs25).
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