India’s private bank, IDFC First Bank is aiming to bring down its NPA level to 2 per cent and net NPA level to 1 per cent.
“We will be targeting a 2-1-2 formula, i.e. Gross NPA of 2 per cent, Net NPA of per cent and provisions of 2 per cent on funded assets on a steady-state basis,” said V Vaidyanathan, Bank Managing Director and CEO in his message to the shareholders in the annual report, said.
Vaidyanathan said the bank’s provisions for the current fiscal year is expected to be only 2.5 per cent of the average loan book which is quite reasonable by industry standards, of which a significant portion has already been taken in Q1 FY22 with the remainder expected to be reduced in Q2, Q3, and Q4 FY 22.
In FY21, the bank’s gross NPA was 4.15 per cent, against 2.60 per cent in the previous fiscal year..
“Going forward we expect to keep our provisions at below 2 per cent of the average loan book,” Vaidyanathan said.
He also stated that IDFC is aiming its long-term retail loan book to grow by 25 percent and expects the growth of mortgage lending for about 40 per cent of its loan book going forward.
Saying that it’s not appropriate to compare with the already established banks, or with entities running profitable when they converted to banks, he said “the power of incremental profitability is lost in the noise”.
IDFC First Bank posted a net profit of Rs 452 crore in 2020-21. While the net loss was Rs 2,864 crore.
In the last 2.5 years, NIM – Net Interest Margin increased from 1.84 percent pre-merger to 5.09 percent in Q4 FY 21 and 5.51 percent in Q1 FY 22.
“We expect profitability to increase as we expand the loan book,” he told the shareholders.