Showing posts from September 12, 2010

IDBI Bank: Buy

Waiving of service charges on low-cost deposits and ambitious branch expansion will help the bank improve its deposit base.

Mr R. M. Malla, CMD…The bank is cashing in on infrastructure financing.
M. V. S. Santosh Kumar
Fresh investments with a two-to-three year time horizon can be considered in the stock of IDBI Bank, the youngest of the public sector banks. The bank focuses mainly on infrastructure lending, a segment expected to contribute heavily to the incremental credit growth of the banking system, going forward.
The recent, much-needed capital infusion from the government will help IDBI Bank support high credit growth. Higher levels of capital would also help decrease cost of funds (by reducing dependence on deposits) for the bank, thereby aiding net interest margin (NIM) expansion. High cost of funds from the time of the IDBI-IDBI Bank merger has been a drag on the bank's NIMs. IDBI Bank's relatively lower cost-income ratio and higher contribution from fee income are key p…