Silver Point

Thomas J. Monaco

Independent Insight Provider

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

Equity Bottom-Up

IDFC First Bank Limited / Equity Bottom-Up

*Poor Result, Despite Profit Anomaly: IDFC First Bank (IDFCBK.IN) [IDFC] reported FY 4Q20 results INR 7.2 bn – the first positive result after six consecutive quarterly losses. Improvement in linked quarter bottom-line performance was solely attributed a INR 189.3 mn (82.1%) decline in quarterly loan loss provisions. Excluding the capital gains of INR 3.2 bn  - likely associated with its Yes Bank (YESBNK.IN) stake, operating profits would have been lower by 44.4% or INR 4.0 bn;  and*Reserves Need Shoring As Tsunami of Weaker Credit Is Upon Us: IDFC posted a INR 189.2 bn (82.1%) loan loss provision decline versus FY 3Q20 – quite a surprise given the pace of deterioration in the portfolio and elevated loans now in moratorium. In our view, IDFC management has severely miscalculated is reserve needs – in fact, we would go as far to say that were it not for its capital raise over the near term provisions actually would have been INR 81 bn higher (nearly 2x higher). In other words, FY 4Q20 should have been the seventh consecutive quarterly loss at IDFC.

*Poor Result, Despite Profit Anomaly: IDFC First Bank (IDFCBK.IN) [IDFC] reported FY 4Q20 results INR 7.2 bn – the first positive result after six consecutive quarterly losses. Improvement in linked quarter bottom-line performance was solely attributed a INR 189.3 mn (82.1%) decline in quarterly loan loss provisions. Excluding the capital gains of INR 3.2 bn  - likely associated with its Yes Bank (YESBNK.IN) stake, operating profits would have been lower by 44.4% or INR 4.0 bn;  and*Reserves Need Shoring As Tsunami of Weaker Credit Is Upon Us: IDFC posted a INR 189.2 bn (82.1%) loan loss provision decline versus FY 3Q20 – quite a surprise given the pace of deterioration in the portfolio and elevated loans now in moratorium. In our view, IDFC management has severely miscalculated is reserve needs – in fact, we would go as far to say that were it not for its capital raise over the near term provisions actually would have been INR 81 bn higher (nearly 2x higher). In other words, FY 4Q20 should have been the seventh consecutive quarterly loss at IDFC. 

IDFC First Bank Limited

IDFC First Bank – False Dawn