IDFC First Bank Share Price Stumbles as Q4 Results Disappoint: Analysts Weigh In

IDFC First Bank shares were trading in a volatile tone on Monday despite a sharp rally of over 1% in benchmark indices— Sensex and Nifty. The banking firm reported weak Q4 earnings, with net profit plummeting over 58% on a year-on-year basis (YoY). Net interest income (NII) remained largely flat (QoQ basis) but witnessed a 10% rise YoY.

At 11:25 am, the shares of IDFC First Bank were trading at Rs 65.89 price level, down by 0.29% on the National Stock Exchange.

The main positive takeaway from the earnings call was that stress in IDFC Bank's microfinance institution (MFI) segment has peaked, signalling that the worst might be over for the bank. This bodes well for the banking firm's future earnings outlook. Meanwhile, stress in the non-MFI part of the business remained stable compared to the previous quarter, which is a positive surprise, as per analysts.

In the last 6 months, the shares of the company have struggled to remain in the positive territory.

Outlook Ahead

On the asset quality front, Gross NPA stood at 1.87%, whereas ex-MFI GNPA improved to 1.63% in the quarter under review.

"Given peaking MFI stress and asset quality holding up in non-MFI, risk perception of the bank is changing. At a 1.2x book value in FY26, the stock is fairly valued, in our view. Re-rating shall depend on the delivery of lower opex/credit costs. We are revising up the target price to Rs 68/1.2x BV from Rs 60," Nuvama Institutional Equities said while reiterating its 'Hold' call.

However, higher credit costs coupled with margin pressures continue to weigh down the overall outlook for IDFC Bank. As per Motilal Oswal Financial Services, the cost-to-income ratio is likely to remain elevated at 71% by FY26 and at 66% by FY27, primarily as the bank will continue to mobilise deposits at a healthy run rate.

"We reduce our earnings by 7% for FY26E amid higher credit cost and margin pressures and estimate FY27E RoA/RoE at 1.1%/10%." The brokerage firm maintains a Neutral stance on the stock, with a target price of Rs 72.

On a year-to-date basis, the shares of IDFC First bank have experienced a marginal surge of 2.65% on NSE. In contrast, the sectoral index, Nifty Bank, has surged over 8% during the same period.