IDFC First Bank tumbles 3% after Q1 results. Should you buy, sell or hold?

Shares of IDFC First Bank shares tumbled 3% to its day’s low of Rs 72.31 on Monday, apparently impacted by its first quarter results. Its standalone net profit fell 11% year-on-year (YoY) to Rs 680.65 crore due to increased provisions in JLG (joint liability group) business following floods in Tamil Nadu.

IDFC Bank’s net interest income (NII) during the quarter rose 25.4% to Rs 4,695 crore while interest income jumped 28% to Rs 8,789 crore.

The lender’s net interest margin (Gross of IBPC and sell-down) reduced from 6.33% in Q1 FY24 to 6.22% in Q1 FY25. Its fee and other income grew 19% YoY from Rs 1,341 crore in Q1 FY24 to Rs 1,595 crore in Q1 FY25.

Here is what brokerages say:

ICICI Securities: Buy| Target price: Rs 95

IDFC First Bank has reported a broadly in-line set of numbers with strong business growth and better cost income, though higher credit costs (as guided) weighed on PAT (Rs 680 crore) and RoA (down 12bps QoQ to 91bps). NIM was down 13bps QoQ to 6.22%, mostly on higher growth in investment and rise in LCR (to 118% vs. 114% QoQ).Deposit growth is likely to sustain >2x industry growth.

Motilal Oswal: Neutral | Target price: Rs 83

IDFC First Bank reported a weak quarter (though in line), with elevated provisioning, while NIM contracted 13bp QoQ. On the business front, deposit traction continued to

remain robust, while CASA mix moderated slightly and advances growth too remained healthy. Motilal Oswal estimates the C/I ratio to moderate gradually to 67.7% by FY26E, while it may remain elevated in the near term, primarily due to the need to mobilize deposits at a healthy run rate.

Nuvama: Hold| Target price: Rs 72

Ex JLG, credit cost is in line at 1.7%. JLG was impacted because overdue loans on account of TN floods in Dec-23 were further stressed from elections/heatwave. The bank’s Q1FY25 PAT dipped 6% QoQ/11% YoY with a beat on opex, but a miss on credit cost—20bp higher than expected. NIM declined 13bp QoQ as QoQ growth in average investments at 11.8% is higher than QoQ loan growth of 4.6%. Credit cost rose sharply from 1.45% to 1.9% QoQ due to JLG/MFI loans. Full-year credit cost guidance has been increased by 18-20bp to 1.85%.

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