Highlights of Q3 FY22 Results

Section 5A Management Results Q3-FY22 results: Our Profits are subdued due to 3 reasons, which will be addressed Commentary on Q3 FY22 in due course • • • • • Legacy High Cost Borrowings to run off: The Bank is carrying Rs. 26,163 crore of legacy high cost borrowings which is currently dragging the P&L by around Rs. 250 crore every quarter(if replaced at our incremental cost of funds of less than 5%). These liabilities have residual average maturity of 2.1 years. As they mature and are replaced by incremental low cost liabilities, the Bank expects to add Rs. 1,000 crore at PBT level. Loss on Retail Liabilities to reduce as we scale up: Since merger in Dec-18, the Bank has opened 393 branches and have installed 615 ATMs apart from investing in necessary digital capabilities. The Bank is currently incurring losses of ~Rs. 325-350 crore every quarter from the Retail Liabilities business segment. As the Bank scales up its retail liability businesses and effectively start cross-sell, then losses will reduce/fade away and this will add to profit to that extent. Investment in setting up the Credit Cards business: The Credit Cards business had highly successful launch. Credit Card business usually has high setup and technology costs. Profitability is achieved when the outstanding book achieves the required scale. The Bank has already issued more than 5.3 lakh credit cards since launch in January 2021. Our business is directly originated and we have yet not had to engage DSAs for our business. We expect this business to break even and become profitable at scale. Loss from this business at this stage is around Rs. 75 crore per quarter at this stage. We believe that all the above three items mentioned above which are currently yielding negative returns for the will get addressed in due course. We feel that as these three items are addressed, ROA and ROE will naturally get addressed and we will move towards RoE of around 15-16%. Finally, we have excess liquidity and have LCR of 149% against the regulatory requirement of 100%. This is a -ve drag to the P&L and the Bank would work forward to reducing the excess liquidity so as to reduce the drag on the P&L in the upcoming quarters. 74 IDFC FIRST Bank

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