Profitability & Capital Adequacy Presentation
Approach to build IDFC FIRST Bank
Background
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IDFC Limited, a reputed Domestic Financial Institution, was awarded a commercial banking license and thus set up IDFC Bank.
As part of this process, IDFC Limited transferred its corporate/infrastructure loan assets, infrastructure bonds, institutional
borrowings and other liabilities to IDFC Bank.
IDFC Bank looked out for a profitable retail franchise to merge with to diversify away from Infrastructure and Corporate Loans.
Capital First Limited, was an NBFC that specialized in Retail & MSME financing based on new technologies. The company grew
from Rs. 94 crores in 2010 to Rs. 32,000 crores in March 2018. It had a NIM of 8.0%. Capital First had grown the loan book at a
5 year CAGR of 29%, had maintained high asset quality of GNPA of 2% and NNPA 1%, and had grown profits at a 5 year CAGR of
56%. Capital First was looking for a commercial banking license.
The two entities merged for their respective reasons and thus IDFC FIRST Bank was created in December 2018.
On merger the Bank had the following issues. As per the financials of 31st December 2018:
a) We had a low CASA at 8.68%.
b) Our total deposits & borrowings were Rs. 1,29,381 crores, of which only Rs. 10,400 crores (8.04%) were retail Deposits.
c)
Our reported annualized NIM was low at 1.9% because of the Infrastructure DFI background.
d) The Bank had large and concentrated exposure in infrastructure and corporate Loans.
Between FY 19-FY 24, the bank has addressed almost all issues including (a) Troubled infrastructure assets (exposure reduced
from Rs. 21,459 crore to Rs. 3,356 crore), CASA (grown to 46%), and profitability (FY 23 PAT of 2,437 crores).
With a strong foundation, the Bank now looks forward to sustained growth with profitability from here on.
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IDFC FIRST
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