Moitlal Oswal has upgraded the stock to a “buy” rating from its earlier recommendation of “neutral”. It has also raised its price target on the stock to ₹105 from ₹90 previously, indicating an upside potential of 23% from current levels.
The brokerage said the lender has delivered strong balance sheet growth, with advances and deposits registering a compounded annual growth rate (CAGR) of 21% and 26%, respectively, in the past three years.
Motilal Oswal’s note said that IDFC First Bank’s deposit growth has outpaced loan growth as the liability franchise has scaled up, and the cash deposit ratio has declined significantly to 94% from 108% in financial year 2023.
Despite the near-term net interest margin (NIM) drag, the FCNR(B) mobilization, which is estimated to add 1.4% – 4.4% to IDFC First Bank’s incremental net interest income (NII), coupled with improving opex intensity, should translate into an estimated 4.1% – 6.8% boost to the Mumbai-based private lender’s estimated FY27 earnings, according to Motilal Oswal.
The brokerage added that IDFC First Bank has strengthened its internal controls and governance processes and has also recently lowered its credit cost guidance, underscoring the strong asset quality trends.
IDFC First Bank’s gross and net non-performing assets (NPAs) should normalise to 1.4% and 0.4% respectively by financial year 2028, Motilal Oswal projected in its note. At the end of the first quarter of financial year 2027, those figures stood at 1.51% and 0.44% respectively.
IDFC First Bank reported its first quarter results in July. Its net profit more than doubled to ₹1,075 crore from ₹463 crore last year, while its NII increased 21.1% to ₹5,972.3 crore from ₹4,933 crore.
The bank had received ₹514.82 crore under the Credit Guarantee Fund for Micro Unit (CGFMU) scheme from National Credit Guarantee Trustee Company (NCGTC) in the June quarter and the amount was booked under provisions and contingencies.
Of the 31 analysts who have coverage on the stock, 22 have a “buy” rating, seven have a “hold” rating and two have a “sell” rating.
Shares of IDFC First Bank are trading 3.5% higher on Wednesday at ₹88.34. The stock, as a result of this move, has also turned positive on a year-to-date basis.
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