Synopsis: Nomura has recommended a “Buy” rating on IDFC First Bank Limited with a target price of Rs. 105, suggesting an upside potential of 22.02 percent. Supported by strong growth visibility and improving profitability
This Private Bank, engaged in providing retail and wholesale banking services including savings accounts, loans, deposits, credit cards, wealth management, and digital banking solutions across India, is in focus after Nomura gave a target of Rs. 105, which has an upside potential of 22.02.
With a market capitalization of Rs. 74,094.84 crore, the shares of IDFC First Bank Limited were currently trading at Rs. 86.20 per equity share, rising nearly 0.17 percent from its previous day’s close price of Rs. 86.05.
Rationale & Target:
Nomura, a prominent brokerage firm, has recommended a “Buy” call on IDFC First Bank Limited with a target price of Rs. 105 per share, indicating an upside potential of 22.02 percent from its previous day’s close price of Rs. 86.05.
The brokerage sees strong upside in IDFC First Bank, supported by strong growth visibility and improving profitability over the medium term. According to Nomura, the bank’s loan and deposit base is expected to grow at healthy compound annual growth rates (CAGR) of around 20 percent and 22 percent, respectively, during FY26-FY28, indicating sustained momentum in core banking operations. The bank’s fee income remains a key strength, standing at over 2 percent of average assets, which is higher than most peers and supports stable earnings.
Nomura expects a sharp improvement in profitability as credit costs decline by around 35 basis points. This is likely to lift Return on Assets (RoA) to about 0.6 percent in FY26 and 1.8 percent by FY28, while Return on Equity (RoE) could improve to 5.4 percent and 1.8 percent, respectively. As a result, earnings growth is projected to be strong, with Nomura forecasting a sector-leading EPS CAGR of nearly 67 percent over FY26-FY28.
Although operating expenses stayed elevated during FY19-FY25 due to investments in branches, manpower, technology, and new businesses, operating leverage is now starting to emerge. Cost efficiency is expected to improve, with the cost-to-assets ratio declining from 5.6 percent in FY26 to 5.1 percent by FY28, and the cost-to-income ratio improving from 71 percent to 64 percent.
Net interest margins, which faced pressure in FY25-H1FY26, are expected to bottom out in FY26 and gradually recover thereafter. Credit costs for IDFC First Bank are expected to improve steadily, declining from 2.6 percent in FY25 to 2.1 percent in FY26F, and further to 1.9 percent in FY27 and 1.8 percent in FY28. With asset quality stress largely contained and valuations at around 1.3x Dec-27 book value, Nomura believes IDFC First Bank offers attractive upside potential.
Business Development:
IDFC First Bank Limited reported steady business performance with loans and advances of Rs. 2,66,579 crore and customer deposits of Rs. 2,69,094 crore. Asset quality remains healthy, with GNPA at 1.86 percent and NNPA at 0.52 percent. The bank’s focus on low-cost funding is evident from CASA deposits of Rs. 1,38,583 crore and a strong CASA ratio of 50.1 percent, supporting stable profitability.
Company Overview:
IDFC First Bank Limited is a Mumbai-based private sector bank formed in 2015 from IDFC Limited’s banking arm and renamed after its 2018 merger with Capital First. The bank focuses on retail and wholesale banking, offering savings accounts, loans, deposits, credit cards, wealth management, and digital services across 1,041 branches.
Recent Quarter Results:
Coming into financial highlights, IDFC First Bank Limited’s Net Interest Income has increased from Rs. 4,788.29 crore in Q2 FY25 to Rs. 5,112.83 crore in Q2 FY26, which has grown by 6.78 percent. The net profit has also grown by 64.10 percent from Rs. 211.94 crore in Q2 FY25 to Rs. 347.8 crore in Q2 FY26.
IDFC First Bank Limited’s Net Interest Income and net profit have grown at a CAGR of 25.73 percent and 124.16 percent, respectively, over the last three years.
In terms of return ratios, the company’s ROCE and ROE stand at 6.22 percent and 4.21 percent, respectively. IDFC First Bank Limited has an earnings per share (EPS) of Rs. 1.96, and its debt-to-equity ratio is 6.85x.
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