The brokerage firm Investec has turned upbeat on IDFC First Bank. It has upgraded rating to “Buy” with a target of Rs 90 per share. This implies an upside of 24% from current levels .
According to the brokerage report, the lender is poised for a sharp earnings lift as costs fall and loan growth stays robust.
Let’s take a look at the key reasons why the brokerage is bullish on this stock –
Investec on IDFC First Bank: Costs could moderate as growth kicks in
According to the brokerage report, IDFC First Bank is now showing early signs of operating leverage across its businesses. The report noted that headline cost-to-assets may not yet reflect this shift due to the rapid expansion in retail lending and deposit mobilisation. However, that phase could be stabilising.
“We see IDFCFB delivering 29% core PPOP CAGR over FY25-28e (highest across banks), aided by ~80 bp reduction in cost-to-assets,” Investec stated.
Loan growth is projected at around 20% CAGR, while operating expenses are expected to grow at 13% CAGR during FY25–28. This gap, as per the report, may help boost core profitability over time.
Investec on IDFC First Bank: Retail push nearing maturity
IDFC First Bank has increased its focus on retailisation in recent years. The retail deposit base now makes up around 60% of total deposits, and the loan book is skewed with 82% exposure to retail and SME segments.
“This journey of ‘retailisation’ is near completion,” the report said, suggesting that the bank may now start seeing operating gains from previous investments in branch network and customer acquisition.
Investec on IDFC First Bank: Credit costs and liquidity – Two key levers
Credit costs stood at 2.6% in FY25, largely due to exposure to unsecured retail lending. However, the brokerage expects this to gradually come down.
The brokerage also believes that the bank’s high fixed rate loan mix and improved risk adjusted net interest margin (NIM) profile give it an edge amid shifting interest rate conditions.
“IDFCFB benefits from having the highest risk-adjusted NIM profile vs peers,” it noted.
Investec on IDFC First Bank: Valuation re-rated based on RoE outlook
Investec has revised its valuation metric, now valuing IDFC First Bank at 1.4 times its estimated June 2027 book value, up from 1 times earlier. This is based on a projected sustainable RoE of 14% and RoA of 1.3% by FY28, compared to 0.5% in FY25.
“We find IDFCFB’s core EPS growth trajectory compelling,” the report said, while also noting upgrades of 3% to 11% in FY26-27 earnings estimates.