Buy IDFC First Bank\, target price Rs 32: Angel Broking
Buy IDFC First Bank, target price Rs 32: Angel Broking
The brokerage believes efforts to build a liability franchise, fresh capital infusion and provision taken on wholesale book will help the bank to tide over the difficult times.
Angel Broking has given a buy rating to IDFC First Bank with a target price of Rs 32. The share price moved up by 2.80 per cent from its previous close of Rs 26.75. The stock’s last traded price is Rs 27.50.
The brokerage believes efforts to build a liability franchise, fresh capital infusion and provision taken on wholesale book will help the bank to tide over the difficult times. The IDFC First Bank is trading at 0.9 times FY22ABV, a significant discount to historical average valuations.
Investment Rationale
The ability to raise sufficient liquidity at low cost would be the key criteria for banks to navigate the current situation, as asset side inflow would be limited. The brokerage believes IDFC Fist Bank, post management change has clearly outperformed in building liability franchise and retail lending. Since new management took charge, every quarter, the liability franchise has been strengthened, says the brokerage.
CASA ratio improved from 10.4 per cent in Q3FY19 to 31.9 per cent In Q4FY20. NIM has improved to 4.24 per cent in Q4 FY20 as compared to 3.03 per cent in Q4 FY19 and 2.89 per cent in Q3FY19. Retail constitutes 61 per cent of funded loan assets 31st March 2020 compared to 37 per cent as on 31 March 2019. While wholesale books continue to decline.
According to the brokerage, the bank is raising Rs 2,000 crore of fresh equity capital during Q1FY21. Post the capital raise, the
capital adequacy ratio will be 15.55 per cent with CET-1 ratio of 15.32 per cent.
Quarterly Results Source: ETMarkets.com
Financials
For the quarter ended March 31, 2020, the company has reported consolidated interest income of Rs 3114.47 crore, up 1.04 per cent from last quarter Interest Income of Rs 3082.39 crore and up 16.63 per cent from last year same quarter Interest Income of Rs 2670.34 crore. The bank has reported net profit after tax of Rs 76.36 crore in the latest quarter.
Promoter/FII Holdings
Promoters held 40 per cent stake in the company as of March 31, 2020, while FIIs held 13.56 per cent, DIIs 9.85 and public and others 36.59 per cent.
