IDFC First Bank share price rallied over 3% in early trade on Wednesday after brokerage firm Motilal Oswal Financial Services upgraded its rating on the stock, citing strong execution, sustained asset-quality improvement, moderation in credit costs and stable net interest margins (NIMs) as the key upside catalysts. IDFC First Bank shares gained as much as 3.02% to Rs 87.77 apiece on the BSE.
The private sector lender has delivered strong balance sheet growth, with advances and deposits registering a CAGR of 21% and 26%, respectively, in the past three years. Deposit growth has outpaced loan growth as the liability franchise has scaled up, with the CD ratio declining significantly to 94% from 108% in FY23.
Motilal Oswal estimates that the 73% leverage on IDFC First Bank's $3.57 billion FCNR(B) deposits — equivalent to 11% of deposits — could compress FY27 NIMs by around 7–12 bps. However, progressive savings account (SA) repricing and term deposit (TD) rate cuts are likely to offset the impact.
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Despite the near-term NIM pressure, the FCNR(B) mobilisation could add 1.5–4.4% to incremental NII. Along with improving opex intensity, this could boost FY27E earnings by an estimated 4.1–6.8%, Motilal Oswal said.
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“IDFC First Bank has made significant progress in strengthening its deposit franchise while sustaining robust loan growth and steadily de-risking the balance sheet. The bank is well positioned for a sustainable recovery in profitability, supported by healthy business growth, improvement in operating leverage and controlled credit cost,” said Motilal Oswal Financial Services.
Additionally, the bank has strengthened its internal controls and governance processes and has recently lowered its credit cost guidance, underscoring strong asset quality trends.
Motilal Oswal estimates GNPA and NNPA to moderate to 1.4% and 0.4%, respectively, by FY28.
It estimates 42% PPoP CAGR over FY26-28E and C/I ratio at ~69%/65% for FY27/28, translating into RoA/RoE of 1.2%/11.9% by FY28E.
The brokerage firm upgraded its rating on IDFC First Bank shares to ‘Buy' from ‘Neutral' with a target price of Rs 105 apiece, based on 1.6x FY28E ABV. IDFC First Bank share price target implies an upside potential of over 23% from Tuesday's closing price.
At 10:20 AM, IDFC First Bank share price was trading 2.92% higher at Rs 87.68 apiece on the BSE.
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