IDFC First Bank Ltd. has received a rating upgrade and target price hike by UBS, backed by an improving earnings outlook despite a one-off fraud incident in February this year.
The brokerage has increased the price target from Rs 78 to Rs 92, and upgraded its rating to 'neutral' from 'sell' citing improvement in asset quality.
"The growth environment has remained healthy, which, along with improving asset quality, enabled the bank to deliver a solid Q1 (RoA of >1%)," UBS said in its note.
The brokerage also expects continued branch expansion to support business growth, with IDFCFB potentially emerging as a key beneficiary among mid-sized banks.
At the same time, UBS flagged an elevated cost-to-income ratio (66%) which will likely cap Return on Assets expansion estimates to 1.1-1.2% over FY27-29, basically at the same rate as between fiscal 2022 and 2024.
"We expect growth to pick up gradually in the high yielding book, though it is likely to lag overall loan growth. Consequently, NIMs are likely to remain stable at 5.8% over FY27-29E, and we expect credit costs to moderate to 1.7% vs 2.6%/2.1% in FY25/26," UBS outlined.
IDFC First Q1 FY27
IDFC First Bank Ltd.'s net profit for the first quarter of financial year 2027 more than doubled year-on-year, marking its highest-ever quarterly profit.
The bottom-line rose from Rs 463 crore in the year-ago period to Rs 1,075 crore. Net interest income rose 21% to Rs 5,972 crore from Rs 4,933 crore.
Operating profit was up 14% to Rs 2,553 crore from Rs 2,239 crore. Provisions declined on a year-on-year basis to Rs 1,144 crore from Rs 1,659 crore, but they rose on a sequential basis from 869 crore.
Asset quality improved as gross NPA declined to 1.51% from 1.61% in the preceding quarter and Net NPA declined to 0.44% from 0.48% sequentially.
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