The share price of the private lender IDFC First Bank continues to be in the spotlight after a sharp fall earlier this week following the disclosure of a suspected fraud at one of its branches. Though the stock saw heavy selling pressure in the previous session, it traded largely flat to negative in today’s trading session, showing some signs of stability.
Amid this backdrop, global brokerage JP Morgan has chosen to retain its ‘Overweight’ rating on the bank.
In intraday trade, the stock was down nearly 2%, showing some stability after the earlier slide. The brokerage has set a target price of Rs 91, suggesting potential upside of 30% from current levels.
Let’s take a look at the key reason why the stock is in focus and what is the brokerage house take on this –
JP Morgan on IDFC First Bank: What triggered the sharp fall?
The pressure began after IDFC First Bank disclosed a fraud incident at its Chandigarh branch. Certain branch-level employees, allegedly in collusion with external parties, facilitated unauthorised transfers from select Haryana government-linked accounts to accounts outside the bank.
Following this development, the stock fell sharply on February 23, declining 16% even as the Nifty rose 0.5% that day.
According to the brokerage report, “The sharp stock price decline on 23 Feb (-16% vs Nifty +0.5%) seems to be factoring in a very bearish scenario, including a significant increase in deposit outflow rates (especially from the deposit balances in Public Sector Enterprises’ accounts at 8-10% of total deposits), with a corresponding increase in funding costs.”
JP Morgan on IDFC First Bank: Earnings cuts but not a downgrade
JP Morgan has adjusted its financial forecasts to reflect the impact of the incident.
As per the brokerage report, “We have incorporated the impact of the recently reported fraud incident in our forecasts with a 19%/5%/4% cut in our earnings forecasts for FY26/FY27/FY28 and a 12.5% cut in our price target as we factor (i) higher provisioning in Q4FY26 as it sees the full P&L impact of the fraud amount, and (ii) moderate SA accretion over FY27/FY28.”
However, despite trimming earnings estimates and reducing the price target, the brokerage believes the correction is excessive. “While we do agree with the downside risk to the NIM trajectory with a potential slowdown in deposit accretion and deferment of further SA rate cuts (post the recent re-calibration), we believe the 23 Feb stock price decline is overdone,” the report added.
JP Morgan on IDFC First Bank: What the bank clarified
Following the incident, the bank held a conference call to address concerns. According to the brokerage report, “IDFC highlighted that the fraud was limited to a particular Chandigarh branch and confined to a limited set of Haryana-government linked accounts, which account for 0.5% of the total deposits.”
The bank has suspended the employees involved and appointed KPMG for a forensic audit. The results are expected within four to five weeks. Meanwhile, recovery efforts are underway, and the bank is working with regulators and other banks to trace the funds.
IDFC First Bank is also considering stronger internal controls. These include app-based customer confirmations for branch transactions, additional verification for high-value transfers, and the use of Artificial Intelligence for early detection of suspicious transactions.
JP Morgan on IDFC First Bank: Financial buffers in place
As per the brokerage report, “IDFC remains well capitalised with adequate buffers to absorb the impact of this scale (16.2% CAR, 115% LCR as of Q3FY26).”
The report also added that part of the loss could be offset through employee dishonesty insurance and possible recovery actions. It noted, “However, the stock price is likely to remain volatile in the near term with a gradual recovery as investors await more details from the completion of the forensic audit and other internal investigations.”
Conclusion
While the fraud incident has raised concerns and led to earnings cuts, the brokerage house JP Morgan expects near-term volatility but maintains that the bank’s capital position and corrective steps could help stabilise the situation over time.