The strategy of the bank has been to conserve capital by not increasing the loan book and yet raise margins by growing the proportion of retail book. It would continue to conserve capital in the future, too.
Funded assets of the bank rose marginally to Rs 1.06 trillion in December 2019 from Rs 1.04 trillion a year ago. IDFC First Bank
came into being on December 18, 2018, following the merger of IDFC Bank and Capital First (CFL).
In the initial few quarters after the merger, IDFC First pro-actively recognised and provided for stressed assets as well as invested in expanding its reach for building a strong retail franchise.
CRISIL said capitalisation is healthy, as reflected in the overall CAR of 13.29 per cent as on December 31, 2019, despite moderation from 15.47 per cent, as on March 31, 2019.
The capital position is supported by a sizeable networth of Rs 15,240 crore and a healthy cushion against asset side risks.
Furthermore, with incremental growth coming from the retail portfolio coupled with scaling down of the wholesale loan book, capital consumption is expected to be at lower levels than seen in the past.
The ‘AA’ rating reflects the bank’s healthy capitalisation, increased focus on retailisation of the loan book, and expectation of improvement in earnings profile.
These strengths are partially offset by the relatively low, albeit increasing proportion of current account and savings account (CASA) deposits in borrowings, CRISIL said.