IDFC First Bank plummets 5% after net profit halves in Q3, brokerages turn cautious

IDFC First Bank shares have lost 26 percent in the past year.

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Shares of IDFC First Bank tanked 5 percent on January 27, dragged by the lender's weak quarterly show. The lender's net profit more than halved to Rs 339.4 crore in Q3, significantly lower than the Rs 715.7 crore that it reported in the year-ago period.

At 09.18 am, shares of IDFC First Bank were trading at Rs 59.17 on the NSE.

However, the lender's net interest income (NII) rose 14.4 percent to Rs 4,902 crore in Q3FY25 as against Rs 4,286.6 crore in the same quarter last fiscal.

Regardless, the bank's net interest margin contracted to 6.04 percent in the December quarter, as compared to 6.18 percent in Q2. The fall in NIMs were largely due to a decline in the micro-finance business and an increase in the composition of the Wholesale Banking business.

"We are specifically tracking Micro-finance loan book closely considering the industry situation. The credit issues in the Microfinance segment are a transitionary issue which is likely to be resolved within a few quarters," V Vaidyanathan, Managing Director and CEO, IDFC FIRST Bank, said in an exchange filing.

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The weakness in the lender's Q3 net profit was also anticipated by the Street. Brokerage firm Morgan Stanley noted IDFC First Bank's weak net profit as it has factored some reversal of MFI contingency provisions.

Looking ahead, Morgan Stanley foresees lower earnings for the lender in FY26/27, primarily on account of a tough macro environment and moderation in revenue growth. Morgan Stanley has an 'equal-weight' stance on IDFC First Bank, with a price target of Rs 58.

Jefferies also echoed similar sentiments, anticipating to see pain continuing for another two-three quarters as MFI continues to drag IDFC First Bank's earnings growth. On the other hand, Jefferies believes stable growth in other segments should lend some support.

Meanwhile, the firm cut its FY26-27 estimates for the lender to bake in its weak earnings, and forecasts of weaker topline growth for FY26. Jefferies has a 'buy' call on IDFC First Bank, with a price target of Rs 73.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.