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IDFC First Bank expects NIM to stabilise at around 6%

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IDFC First Bank CEO V Vaidyanathan said the lender's restructured book improved from two percent to 2.9 percent in the quarter ended September 30.

IDFC First Bank’s financial results for the July-September missed Street estimates by a thin margin, despite the lender utilising the COVID buffer provisions. There was some improvement on the asset quality and net interest margin (NIM) fronts. The NIM continues to hold at higher levels.
The bank reported a nearly 50 percent jump in standalone net profit to Rs 151.7 crore for the quarter ended September 2021. It had posted a net profit of Rs 101.4 crore for the corresponding period a year ago. IDFC First Bank had posted a net loss of Rs 630 crore for the quarter ended June 2021.
Throwing light on IDFC First Bank's quarterly performance, CEO and Managing Director V Vaidyanathan said the restructured book went up from two percent to 2.9 percent in the quarter ended September 30. About 45 basis points out of the 90 basis points of increase was from the rural business, he said.
“In the first quarter, our provisions were at Rs 1,860 crore. This quarter, it was Rs 450.6 crore. So, if you put the two together, basically, you will see that we have provided for close to about Rs 2,350 crore in the first half. For the full year, we have guided for Rs 3,000 crores. Therefore, Rs 3,000 crore minus Rs 2,350 crore, it is about Rs 650 crore. If you believe our guidance for the rest of the year, it is Rs 650 crore in two quarters,” he added.
The net interest margins (NIM) for the bank continues to look good. For the quarter ended September, it stood at 5.7 percent approximately, an improvement on year-on-year as well as quarter-on-quarter bases, he said.
Asked if the lender will be able to improve from the current levels, Vaidyanathan said it will probably improve slightly and then taper off "because they not meant to go up indefinitely".
“We had guided initially for 5-5.5 percent at a time of the merger, and this 5.7 percent also has a bit of uptick because of the fact that in the subsidiary we had a certain amount of income, which is now getting added up to the income line and is also adding to the expense line. So without getting into technicalities, it should flatten out from here, mainly because of the fact that we are now beginning to prime home loans where the margins are relatively let me say more moderate,” he explained.
"So the margins will stabilse at around 5.9-6 percent, and won't go up indefinitely. But that would be healthy margins for the bank,” he stated.
The lender's interest income stood at Rs 4,100.6 crore, up from Rs 3,924.9 crore earlier. Its provisioning for bad loans and contingencies was raised substantially to Rs 474.95 crore for September quarter as bad loans increased.
On recoveries, he said the bank was getting strong recoveries from the portfolio it provided before. "That is one of the best benefits of the retail business because you provide as per formula, but eventually, when the economy comes back, many of those customers pay back. We had guided for about Rs 650 crore in the provision for the rest of the two quarters left for us, now excluding, of course, the Vodafone account. That Rs 650 crore takes into account slippage and writebacks on a net-net basis,” he said.
Vaidyanathan also said there was no inorganic growth on the cards.
For the full interview, watch the accompanying video
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