Capitaline

Analyst Meet / AGM 01-Nov-14

Conference Call

IDFC

Proposes to further step up provision, expects flat loan book in FY2015

IDFC conducted concall on 31 October 2014 to discuss financial results for the quarter ended September 2014. Vikram Limaye, MD&CEO, Sunil Kakar, Group Chief Financial Officer addressed the call:
Highlights:

Company is still awaiting the clarifications from the Reserve Bank of India RBI on regulatory benefits for bank lending to the infrastructure sector as announced in the Union Budget 2014-15.
Net restructured loans of the company increased to 6.1% at end September 2014 from 5.3% at end June 2014. About 87% of the restructured advances related to the energy sector. Of the restructured advances in the energy sector, about 31% related to gas based sector.
Securities receipts book of the company stood at 0.3% of the loans book at end September 2014.
Company has exposure to coal sector, including power sector with coal mines at 5% of the loan book.
Company has initiated hiring process for proposed bank, which would be operationlized on 01 October 2015.
The Board approved a proposal to demerge its financing undertaking into its wholly owned step down subsidiary IDFC Bank, which will be completed over next six-nine months.
Company has continued with prudent policy of building counter-cyclical provisions. It stepped up overall provisions outstanding to 3.6% of loans from 3.1% a quarter ago and 2.4% a year ago. Company proposes to continue to build provisions for next few quarters with a view to avoid any surprising provision requirement in a first year of banking operation.
IDFC Bank shares will be listed on completion of demerger process.
The proposed bank has to be CRR/SLR compliant on the first day of operations. The company would build the investment book depending on its interest rate view and be compliant with the norms.
Treasury book of the company stood at Rs 17000-18000 crore, of which about Rs 13000 crore securities has duration of above seven-years qualifying for SLR status.
Company expects the loan book to be flat in FY2015.
Company expects the expense ratio to rise above 30% over next 12-month in a process to becoming bank from current 15% level.
Margins of the company were lower mainly on account of higher incremental lending to the top rated customer carrying lower yields.

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