IDFC First Bank Q2 Results Review - PPoP Inline; Elevated Provisioning Drags Earnings: Motilal Oswal

Motilal Oswal Report

IDFC First Bank Ltd. reported a weak quarter with elevated provisioning causing a big drag on earnings. Net interest margin moderated 4bp QoQ, though opex was in line with our expectations; this led to a slight easing in the C/I ratio.

On the business front, deposit traction continued to remain robust, while current account and savings account mix also witnessed an improvement. Advances growth also remained healthy, led by steady traction across Retail, SME, and Corporate finance.

We estimate the C/I ratio to moderate gradually to ~66% by FY27 while it may remain elevated in the near term, primarily due to the need to mobilize deposits at a healthy run rate to further bring down the CD ratio.

We cut our earnings by 18%/5% for FY25E/26E and estimate FY26E RoA/RoE of 1.0%/11.0%. Reiterate Neutral with a revised target price of Rs 73 (premised on 1. times FY26E adjusted book value).

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