IDFC First Bank shares rally after highest-ever profit in Q1. Should you buy?

Shares of IDFC First Bank rallied more than 8% to ₹40 apiece on the BSE in Monday's opening deals after the bank reported its highest ever net profit of ₹474 crore for the quarter ended June 2022, 

mainly driven by lower provisioning and higher income, up 38% from the previous quarter of March 2022. The private sector lender had posted a net loss of ₹630 crore in the year-ago quarter. 

IDFC First Bank's net interest income (NII), which is the difference between interest earned and interest expended, grew by 26% to ₹2,751 crore in Q1FY23 whereas the net interest margin (NIM) improved to 5.89% from 5.50%. 

The asset quality of the bank showed improvement as the gross non-performing assets (NPAs) fell to 3.36% of the gross advances in the June 2022 quarter against 4.61% a year ago. The net NPAs too came down to 1.30% from 2.32%. 

IDFC FIRST Bank (IDFCFB) beat I-Sec and consensus Q1FY23 profit estimates with 38% QoQ PAT increase. After delivering RoA, a core operational profit trajectory of Rs10bn (up 18% QoQ/64%) increases confidence in RoA/RoE, said ICICI Securities.

"We have posted the highest ever profit after tax of ₹474 crore in Q1FY23. Our return on assets has nearly touched 1 per cent and we expect it to rise from here," V Vaidyanathan, Managing Director and CEO, IDFC FIRST Bank said. 

IDFC First Bank shares are down more than 21% in 2022 (year-to-date or YTD) so far, whereas, the counter has declined about 25% in a year's period. 

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