Axis Securities has reiterated its BUY rating on IDFC First Bank with a target price of Rs 91 per share, citing a potential 26% upside. The brokerage revised its earnings estimates upward for FY27-28, buoyed by strong asset quality improvements and robust topline growth. While the bank faces challenges from an elevated cost-to-income ratio, the report emphasizes a positive outlook on the bank's return on assets (RoA) recovery.
Axis Securities Retains BUY Rating on IDFC First Bank
Target Price: Rs 91 per share.
Recent Net Profit: Rs 1,045 Cr (up 196.5% YoY).
Reader Takeaway: Strong asset quality and NII growth drive the bullish outlook, while high cost-to-income remains a monitoring priority.
What just happened
Axis Securities has released a research update on IDFC First Bank, maintaining its 'BUY' recommendation. The brokerage has increased its earnings estimates for the bank by 1-8% for the FY27-28 period. This optimism is based on the bank's operational efficiency and stable credit costs observed in the standalone Q2FY27 results.
Why this matters
The bank reported a significant year-on-year rise in net profit to Rs 1,045 Cr. Net Interest Income grew by 21% to Rs 6,184 Cr, reflecting strong core business momentum. Despite a 38 bps sequential contraction in Net Interest Margins (NIMs), analysts expect a recovery toward 5.8% by the end of FY27, which supports the higher target price.
Asset Quality and Performance
Asset quality continues to strengthen, with Gross NPA improving to 1.3%, down from 1.9% in the same period last year. Management has maintained its credit cost guidance at 1.5-1.6%, signaling stability in loan book health even as the bank continues to scale its advances. Deposits and gross advances both showed healthy growth of over 30% on a yearly basis.
Risks to watch
The bank's cost-to-income ratio remains high at 70.1%, which continues to pressure the bottom line. Additionally, the bank’s significant exposure to unsecured retail and credit card segments remains a sensitivity point; any unexpected deterioration in these categories could lead to higher-than-anticipated credit costs. The brokerage also highlighted that broader systemic credit slowdowns could impact future earnings.
What to track next
Investors should closely watch the bank’s ability to optimize its cost-to-income ratio and the actual realization of its NIM recovery target. The management’s focus on sustaining a 20% credit growth while keeping the CASA ratio in the high 40% range will be critical for long-term margin stability.