IDFC First Bank shares rise following Q1 earnings record. Buy?

Shares of IDFC First Bank gained in value by more than 3% during Monday's opening transactions on the BSE.

Shares of IDFC First Bank soared more than 8% to 40 per share on the BSE in Monday's opening deals after the bank reported its highest-ever net profit of 474 crore for the quarter ended June 2022, primarily driven by lower provisioning and higher income, up 38 percent from the previous quarter of March 2022. The private sector lender reported a net loss of 630 crore for the same quarter last year.

As a sign of improved asset quality, the bank's gross non-performing assets (NPAs) dropped from 4.61 percent of gross loans a year earlier to 3.36 percent in the June 2022 quarter. The net NPAs also dropped from 2.32 percent to 1.30 percent.

"IDFC FIRST Bank's (IDFCFB) Q1FY23 earnings were much better than I-Sec and consensus estimates, with PAT increasing by 38% QoQ. According to a study from ICICI Securities, after achieving RoA, the core operating profit trajectory of Rs 10 billion (up 18% QoQ/64% YoY) encourages confidence in the expected RoA/RoE.

Shares of IDFC First Bank: FY23 Expected Return

IDFC First Bank anticipates a retail GNPA of less than 2% and a credit cost of 1.5% in FY23. The brokerage stated that the current RoE profile is burdened by high cost structure, loss in retail liabilities, and credit card operations. The brokerage has maintained its buy rating on the bank stock with an unchanged target price of 59 per share and views an elevated cost structure as a significant risk.

"We reported the highest profit after taxes ever in Q1FY23, at Rs. 474 crore. We predict that our return on assets, which has virtually surpassed 1%, will continue to rise. Vaidyanathan, CEO and Managing Director of IDFC FIRST Bank, said

In 2022, the price of shares of IDFC First Bank has dropped by more than 21% year-to-date (YTD), compared to a decline of almost 25% over a 12-month period.

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