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IDFC
Strong growth in core earnings
In 3QFY11, IDFC reported a strong growth in core earnings. NII increased by 23%
qoq (+65% yoy), while loans grew by 2.0% qoq (+50% yoy). Fee income growth
moderated on qoq basis, in line with the moderation in loan growth. IDFC
(consolidated) trades at 2.0x FY12F book value and 13.4x PE, we maintain Buy.
Sharp growth in net interest income
Net interest income on infrastructure assets increased to 3.5% (3.3% in FY10) while net
interest income on treasury operations were largely stable at 0.3% (0.3% in FY10). However,
reported spreads (12 month rolling basis) came down to 2.4% (2.7% in FY10) but were stable
qoq.
Note, that IDFC had raised equity capital in 2QFY11 and the momentum in NII is partly due to
the same. Further, loan growth in 2Q was back-ended, which has led to sharp growth in NII
on qoq basis.
Fee income increased by 25% yoy (-35% qoq) largely on the back of moderation in fee
income growth related to lending activities.
Operating expenses increase at a fast pace
Operating expenses grew by 50% yoy (+33% qoq). Operating costs to income ratio was at
24.5% in 3QFY11 compared to 20.8% a year ago (18.9% in 2QFY11).
Business growth moderates, inline with management guidance
Loans grew by 2% qoq (+50% yoy) on the back of 54% qoq fall in disbursements during
3QFY11. Approvals fell by 81% qoq (-44% yoy) in 3QFY11, suggesting that incremental loan
growth in 4QFY11 will be moderate.
Return on assets
On a rolling 12-month basis, reported ROAs came down by 20bps to 3.1%. Net interest
income to average assets increased by 20bp qoq to 3.8% which was more than offset by the
40bp qoq decline in non-interest income to average assets to 2.5%.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
IDFC
Strong growth in core earnings
In 3QFY11, IDFC reported a strong growth in core earnings. NII increased by 23%
qoq (+65% yoy), while loans grew by 2.0% qoq (+50% yoy). Fee income growth
moderated on qoq basis, in line with the moderation in loan growth. IDFC
(consolidated) trades at 2.0x FY12F book value and 13.4x PE, we maintain Buy.
Sharp growth in net interest income
Net interest income on infrastructure assets increased to 3.5% (3.3% in FY10) while net
interest income on treasury operations were largely stable at 0.3% (0.3% in FY10). However,
reported spreads (12 month rolling basis) came down to 2.4% (2.7% in FY10) but were stable
qoq.
Note, that IDFC had raised equity capital in 2QFY11 and the momentum in NII is partly due to
the same. Further, loan growth in 2Q was back-ended, which has led to sharp growth in NII
on qoq basis.
Fee income increased by 25% yoy (-35% qoq) largely on the back of moderation in fee
income growth related to lending activities.
Operating expenses increase at a fast pace
Operating expenses grew by 50% yoy (+33% qoq). Operating costs to income ratio was at
24.5% in 3QFY11 compared to 20.8% a year ago (18.9% in 2QFY11).
Business growth moderates, inline with management guidance
Loans grew by 2% qoq (+50% yoy) on the back of 54% qoq fall in disbursements during
3QFY11. Approvals fell by 81% qoq (-44% yoy) in 3QFY11, suggesting that incremental loan
growth in 4QFY11 will be moderate.
Return on assets
On a rolling 12-month basis, reported ROAs came down by 20bps to 3.1%. Net interest
income to average assets increased by 20bp qoq to 3.8% which was more than offset by the
40bp qoq decline in non-interest income to average assets to 2.5%.
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