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

Motilal Oswal's research report on IDFC First Bank

IDFC First Bank (IDFCFB) reported a stable performance in 3QFY23. PAT rose 115% YoY to INR6.0b, driven by higher NII, healthy retail deposit growth and higher fee income. Business growth remained robust as the loan book grew 26% YoY, led by 37% YoY growth in retail loans. The wholesale book was flat. The growth in deposits was encouraging at 8% QoQ. CASA deposits too saw a healthy growth of 5% QoQ. Thus, the CASA ratio was strong at 50%. IDFCFB is entering a phase of strong loan growth as the drag from the wholesale book moderates. This will be aided by a strong pickup in profitability due to the replacement of high-cost borrowings, better cost trends and controlled credit costs. We estimate IDFCFB to deliver FY25 RoA/RoE of 1.3%/15.1%. Maintain BUY.

Outlook

We estimate a 40% CAGR in PPoP during FY22-25E, while controlled credit costs will drive a 210% CAGR in PAT over the similar period. We thus estimate RoA/RoE to reach 1.3%/15.1% by FY25E. Maintain BUY and a TP of INR70 (1.5x Sep’24E ABV).