Neutral IDFC First Bank; target of Rs 70: Motilal Oswal

Motilal Oswal's research report on IDFC First Bank

IDFC First Bank (IDFCFB) reported a 3QFY25 PAT of INR3.4b (53% YoY decline, 32% miss to MOFSLe) due to an increase in opex (5% vs. our est) and elevated provisions. NII grew 14% YoY to INR49b (in line), while NIM moderated 14bp QoQ to 6.04%, amid a decline in MFI business, an increase in the composition of wholesale business, and an increase in CoF. Opex grew 16% YoY/8% QoQ to INR49.2b, while the C/I ratio increased to 73.7% from 69.9% in 2QFY25. Net advances grew 20.3% YoY/3.7% QoQ, while deposits rose 29.8% YoY/ 5.9% QoQ. GNPA ratio increased 2bp QoQ to 1.94%, while NNPA rose 4bp QoQ to 0.52%. Credit costs were elevated at 2.6% amid continued stress in MFI. We reduce our earnings by 26%/10% for FY25E/FY26E amid higher opex and estimate FY26 RoA/RoE at 0.8%/8.1%. Reiterate Neutral with a revised TP of INR70 (premised on 1.2x Sep’26E ABV).

Outlook

We reduce our earnings by 26%/10% for FY25E/26E amid higher opex and estimate FY26E RoA/RoE of 0.8%/8.1%. Reiterate Neutral with a revised TP of INR70 (premised on 1.2x Spe’26E ABV).