IDFC First Bank shares continue downward slide, falls 6% in 5 days

IDFC First Bank extends losses; UBS sees muted ROA and neutral risk-reward outlook.

Shares of IDFC First Bank fell over one percent to close at Rs 73 per share on July 11, marking its fifth consecutive day of losses. Over the past five trading sessions, the stock has declined about 6 percent, compared to 1 percent drop in the benchmark Nifty 50 index during the same period.

Despite this recent weakness, the stock of the private lender has still gained 14 percent so far this year, outperforming the 5 percent rise in the Nifty 50 index.

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Recently, UBS initiated coverage on the stock with a neutral rating and set a target price of Rs 85, citing limited upside potential in the medium term. UBS highlighted challenges to the bank’s return on assets (ROA), owing to high credit costs and operational expenses.

UBS observed that while an easing liquidity environment supports growth, IDFC First Bank’s cost-to-income (C/I) ratio is expected to moderate but still remain high. They projected the bank’s ROA to stay around 1 percent by FY27, slightly below the 1.1 percent seen in FY22–24, which limits potential improvement in return on equity (ROE).

At about 1.3 times the estimated book value for September 2026 (P/BV), UBS considers the stock’s risk-reward profile to be neutral. The brokerage also noted that the bank’s loan mix shift and potential rate cuts could put pressure on net interest margin (NIM), though the bank has already adjusted its lending rates by 25–125 basis points to help offset some of that impact. UBS expects the NIM to remain steady at 6.1 percent by FY27, similar to FY25 levels.

For the near term, UBS cautioned that Q1 performance could remain muted, due to higher credit costs and margin pressures. They estimate credit costs to stay high at 2.1 percent for FY26, easing to 1.8–1.9 percent in FY27–28, with a high credit-to-income ratio of about 67 percent. This, along with cost pressures, is why UBS forecasts an ROA of just 1 percent by FY27.

Separately, in a regulatory filing, IDFC First Bank said its Board of Directors will meet on Saturday, July 26, 2025, to consider and approve the unaudited standalone and consolidated financial results for the quarter ended June 30, 2025.