IDFC First Bank - Industry Leading Deposits, Net Profit Growth To Drive Re-Rating: ICICI Securities

ICICI Securities Report

We upgrade IDFC First Bank Ltd. to Buy (from Hold) as we see the near-term (H1 FY25) stagnation in the cost-to-income ratio/rise in credit costs likely being outweighed by industry-leading deposits/loan/PAT growth.

For FY24-26, we see deposits growth (~13-14% compound annual growth rate) and PAT growth (mid-teen CAGR) as key challenges for the banking system. That said, we believe IDFC First Bank with industry leading deposits growth (26% CAGR over FY24-26; double of industry) and PAT growth (~30% CAGR; double of industry) look exciting.

IDFC First Bank is also likely to be least impacted by the RBI’s Projects Under Implementation draft guidelines. Merger consummation within a quarter, or so, should lift FY25E/26E book value per share by 3–4% (not in our estimates yet) on reduced share-count.

We broadly maintain our PAT estimates (upgrade of ~1%). We raise our target price to Rs 95 (from Rs 85), valuing the stock at ~1.7 times FY26E ABV.

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