Buy IDFC FIRST Bank; target of Rs 95: ICICI Securities

ICICI Securities's research report on IDFC FIRST Bank

We upgrade IDFC First Bank (IDFCFB) to BUY (from Hold) as we see the near-term (H1FY25) stagnation in the costincome ratio/rise in credit costs likely being outweighed by industry-leading deposits/loan/PAT growth. For FY24-26, we see deposits growth (~13-14% CAGR) and PAT growth (mid-teen CAGR) as key challenges for the banking system. That said, we believe IDFCFB with industry leading deposits growth (26% CAGR over FY24-26; double of industry) and PAT growth (~30% CAGR; double of industry) look exciting. The bank is also likely to be least impacted by the RBI’s Projects Under Implementation draft guidelines. Merger consummation within a quarter, or so, should lift FY25E/26E BVPS by 3–4% (not in our estimates yet) on reduced share-count.

Outlook

We broadly maintain our PAT estimates (upgrade of ~1%). We raise our TP to INR 95 (from INR 85), valuing the stock at ~1.7x FY26E ABV.