Recently, IDFC First Bank has announced a certain disclosure to the Bombay Stock Exchange (BSE). In this blog, we will discuss in brief this update and will check whether this news will be good for shareholders or not?
Introduction:
It is always required to follow the events and disclosures of the company. Likely, in this blog, we will be discussing one of the disclosures submitted by IDFC First Bank to BSE which is quite positive. Let’s read more about these disclosures in detail.
Disclosure by IDFC First Bank
- The IDFC First Bank has got the rating from Brickwork Ratings as AA+ for its Non-Convertible Debentures of around Rs. 2496 Cr. This is a stable rating that has been reaffirmed. It is a positive sign for the bank.
- Fund-based bank loans which were there with Bank have become zero. Hence, BWR has withdrawn the rating of bank loan facilities of IDFC Bank.
- It is felt that the bank is maintaining its capital positioning very well.
Credit Strengths as per Agency:
- The rating agency is quite comfortable with banking capitalization.
- The current capital adequacy ratio is 16.32% which is quite good and is improving quarter on the quarter that’s a positive sign.
- Their focus has shifted to the retail side which is also a positive side.
- They are achieving their targets much before their timelines.
- Gradual conversion from the wholesale to the retail-oriented bank could happen very soon.
- Strong board and experienced management team- Mr. V Vaidyanathan is a veteran in the Retail banking industry.
- Earning profile of the bank is slowly improving. As the slippages and provision will become less then the profitability should come back.
Credit Risks as per Agency
- Concern on asset quality.
- Legacy loans are still a problem but the bank is trying to control it and trying to bring down that percentage to zero. Need to watch how that can be achieved.
- This quarter there is pressure on retail loans due to which NPAs are getting created.
- Higher cost to income ratio. The incomes are muted because of slippages and provisions and other factors.
- As the cost of deposits lowers down cost to income ratio will also increase. But currently, there is a concern so need to keep a watch.
- Due to the coronavirus 2nd wave, it has also impacted a lot of sectors. As these are the key risks especially for retail-oriented banks.
Conclusion:
This development in the IDFC First Bank Stock is positive news for its shareholders. The Bank needs to still cope up with all the risks which lie ahead in its path, and hence investment in this stock can be an aggressive call. But one needs to do proper research and study before investing in the stock. One should consult their financial advisor before making any investment decision.
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