IDFC First Bank has realigned its liability mix in favor of deposits, thereby reducing the credit-deposit ratio from a peak of 137% in Dec'18 to 93.4% in Q1 FY26. Management expects a CD ratio of ~90% by year-end and late 80s in the coming years, a key milestone for sustainable growth.
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Motilal Oswal Report
IDFC First Bank Ltd. has delivered remarkable progress in deposit retailization while maintaining robust loan growth and steadily reducing balance sheet risks.
With net interest margin guidance of ~5.8% in Q4 FY26, continued deposit momentum, and strong capital buffers (CRAR 15% before capital raise; 17.6% after the raise), the bank is positioned to deliver improved profitability metrics in the coming years, though elevated cost ratios and the provisioning drag from MFI remain near-term constraints on earnings.
We thus estimate pre-provision operating profit/PAT CAGR of ~33%/71% over FY26-28E, translating into RoA/RoE of 1%/9.3% by FY27E.
We maintain our Neutral rating with a target price of Rs 80.
Execution on cost/income reduction, sustained asset quality improvement, reduction in credit costs and steady NIMs are key upside catalysts.
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