Investors have taken notice of the IDFC First Bank Ltd. and its performance update during the quarter of December. It has reportedly given reasons for optimism to all investors. Shares have been seen to increase around 21.6% in less than a week and they have outperformed the large market. They even managed to outperform in the sector index by a mile.
In an exchange filing that took place on Wednesday, the bank announced that its loan book was flat. Deposits grew by 11.4% during the December quarter. The performance is not considered overtly extraordinary and does not seem to support the optimism for the stock.
IDFC First Bank’s retail deposit growth and retail loan growth has gathered a lot of speed. For the December quarter, retail loans reportedly grew by 24%. Low-cost current and savings account deposits created 48.2% of total deposits. This number is sharply higher than 36.5% in the September quarter. The bank has been increasing its deposit book consequently, particularly in retail, in the financial year of 2021. Of course, the forced savings of Indian customers during the pandemic cannot be ignored and have played a large role. This has benefited not just IDFC First bank but all banks and it has managed to garner deposits. That being said, the pace at which the deposits in IDFC have grown gives a lot of comforts and builds a sense of confidence in investors, especially since this very same thing posed to be a threat and was a concern three years ago.
The merger between IDFC Bank and Capital First Ltd in December 2018 has made it possible for the lender to become a retail-oriented bank. Through this merger, IDFC has been able to bring down its delinquency levels as well. The investors should try and keep a watch out for potential stress in the wake of the pandemic. The lender, in fact, has increased any provisions anticipating stress, though its covid provisions are only 2.2% of its standard advances.