Why IDFC First Bank Share Price is Falling

Back in June 2023, we penned an in-depth analysis focusing on IDFC First Bank's extraordinary surge.

We examined the factors responsible for the remarkable 21.5% increase in IDFC First Bank's stock price over a month.

As things stand now, despite its impressive growth, IDFC First Bank's shares have taken a substantial hit. In the past week, the bank's stock price has dipped by nearly 5%, and over a month, it has fallen by more than 12%.

Let's look at the reasons behind the fall.

#1 Profit Booking

IDFC First Bank experienced a significant drop in its stock price, declining nearly 5% during early trading on 30 October 2023 and it continued to fall on 31 October on account of profit-booking after reporting strong profit growth in Q2.

Notably, shares of the bank were on an uptrend in the past few months, with a remarkable 40% gain in the year 2023 until 27 October 2023. Over the past year, the stock had generated gains exceeding 45%.

In Q2, the private sector lender achieved a remarkable 35% year-on-year increase in its net profit, reaching Rs 7.5 billion (bn). This growth was due to the robust expansion of core operating income, which also surged by 35%.

Furthermore, the bank's net interest income exhibited a positive trend, standing at Rs 39.5 bn, marking a significant 32% increase compared to the same period in the previous year. Additionally, the net interest margin expanded by 0.5%, reaching 6.3%.

In terms of asset quality, there was a notable improvement, with gross non-performing assets (NPAs) decreasing by 0.1% to reach 2.1%, while net NPAs declined by 0.02% to 0.7% for the quarter.

What Next?

Looking ahead, IDFC First Bank has outlined key areas to drive its growth in the current financial year, which includes home loans, business banking, digital loans, KCC (Kisan Credit Card), tractor loans, gold loans, and priority sector loans.

Despite these growth strategies, it's worth noting that credit growth in the financial year 2024 is expected to be slower compared to the growth rate witnessed in 2023.

Over the next 12-18 months, the bank anticipates steady profitability but limited scope for margin improvement.

The bank's management is confident in its ability to navigate any potential slowdown, underpinned by the attainment of significant operating profits. They believe that the current level of operating profit is approaching a state of permanency.

To boost credit line growth, the bank has plans for nationwide expansion. However, this expansion is expected to bring about significant competition, not only from larger private sector banks but also from fintech companies.

Furthermore, the recent merger is poised to transform the bank into a financial services powerhouse, enhancing operational efficiency for the newly merged entity and fostering synergies within its operations.

How IDFC First Bank Shares have Performed Recently

IDFC First Bank shares fell 12.9% in the last one month, while over the week the stocks is down 5%.

The stock is up 34.1% in 2023 so far. It gave returns of over 45% in the last one year.

IDFC First Bank touched its 52-week high of Rs 100.7 5 September 2023 and a 52-week low of Rs 52.1 on 28 March 2023.

At the current price, IDFC First Bank trades at a PE multiple of 19.9 and a price-to-book value multiple of 2.1x.

About IDFC First Bank

IDFC First Bank (formerly IDFC Bank) is an Indian private sector bank formed by the merger of the banking arm of Infrastructure Development Finance Company and Capital First, an Indian non-bank financial institution.

It is the first universal bank to offer monthly interest credit on savings accounts, lifetime free credit cards with dynamic and low annual percentage rates.

To know more about IDFC First Bank, check out its IDFC First Bank factsheet and quarterly results.

You can also compare companies with their peers.

IDFC First Bank vs RBL Bank

IDFC First Bank vs HDFC Bank

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...