Buy IDFC FIRST Bank: target of Rs 95: ICICI Securities

What happened

ICICI Securities reported that IDFC FIRST Bank's Q2FY27 profit after tax of INR 10.4bn was 5% ahead of its estimates, with in-line net interest income and slippages. It maintained BUY but cut its target price to INR 95 from INR 100.

Confirmed

Global impact / market context

The lower target reflects expectations of permanently weaker banca fee, a commission-based income stream, even as profit beat estimates. For investors, this means cost efficiency and steady loan quality are offset by pressure on fee revenue, so future profit growth may depend more on lending spreads.

Analyst inference

The bank absorbed large foreign currency deposits of USD 3.6bn, which means borrowed funds that lowered its net interest margin, a key measure of lending profit, by about 35bps to 5.58%. Management expects a pullback to 5.8% by Q4FY27, signaling margin recovery is central to the earnings outlook.

Analyst inference

What to watch

1. The bank expects its net interest margin, the gap between interest earned and paid, to recover to 5.8% by Q4FY27 after falling about 35bps on large foreign currency deposits. Confirmed
2. ICICI Securities proposed a lower target multiple of about 1.4 times FY28 adjusted book value, down from 1.5 times, to reflect structurally lower banca fee, which is fee income from selling insurance and other products. Proposed
3. Investors should watch whether banca fee erosion proves permanent, because ICICI Securities left FY28 profit estimates broadly unchanged on that assumption, suggesting any surprise could move earnings and the target price. Analyst inference

Evidence

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