Confident that the company would grow profitably from here on the back of its successful transition from infrastructure lending to building a retail loan book, Axis Securities initiated a buy rating with a target price of Rs 70, implying a 31% upside. from the current market price of Rs 53.3.

The company has reduced its high-risk infrastructure book to 5% of the loan book in FY22 from 37% in FY18 and management has indicated that the same is expected to decline further, the brokerage said in a report.

“We expect the loan book to report healthy growth of 20-25% over FY23-25E with a focus on the retail segment and steady to lower growth in the corporate segment,” Axis Securities said.

Bank’s cost of borrowing was reduced to 5.1% in FY22. Currently, with a strong CASA ratio of 50.04% (Q1FY23), the brokerage earns

First, in a good position to grow with a reasonable level of borrowing costs.

“We expect the bank to continue its journey forward to further increase its ROA/ROE by leveraging strong unit economics, growing retail lending business with ROE of 18-20%, improving branch productivity with normal cost ratios to revenue and scaling up. increasing its fee income from new business launches like Wealth, FASTag, credit card, CMS, among others. We expect IDFC FB to continue to deliver RoA of 1%+ over FY23-25E, ” said the brokerage firm.

In Q1FY23, the bank’s retail book continued to report a strong growth rate of 40% YoY. This was driven by credit cards (183% YoY), digital and gold loans (123% YoY), and home loans (60% YoY).

“Furthermore, the bank has been reducing its infrastructure loan book by 32% CAGR over the last 3 years. We believe this will lead to better asset quality and ultimately lower loan costs. We also believe the bank’s ROA/ROE will expand further with better operational performance. , improving asset quality, reducing the cost-to-income ratio and improving operations and lower cost of credit, it added.

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