Buy IDFC First Bank; target of Rs 75: Motilal Oswal

Motilal Oswal's research report on IDFC First Bank

IDFC First Bank (IDFCFB) reported a PAT of INR8b (25% beat, +134% YoY) in 4QFY23, boosted by trading gains of INR2.2b. NII grew by 35% YoY, with margins expanding 5bp QoQ to 6.41%. Business growth remained strong as the loan book was driven by healthy growth in Commercial Finance retail loans. The wholesale book declined 6% YoY. Deposits grew at a healthy 37% YoY, with CASA deposits up 8% QoQ. Thus, the CASA ratio stood strong at ~50%. IDFCFB is entering a phase of strong loan growth as the drag from the wholesale book continues to moderate. 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 thus estimate a 31% earnings CAGR over FY23-25 and RoA/RoE of 1.3%/13.5% in FY25. Maintain BUY.

Outlook

We estimate a 31% CAGR in PPoP during FY23-25, while controlled credit costs will drive a 31% CAGR in PAT over the similar period. We thus estimate RoA/RoE to reach 1.3%/13.5% by FY25. Maintain BUY with a TP of INR75 (1.6x Sep’24E BV).