Why Are Brokerages Positive on IDFC First Bank’s Q2FY26 Recovery Story?
IDFC First Bank continues to attract attention from leading brokerages following its Q2FY26 results that showcased robust growth, improving asset quality, and stable profitability. Jefferies maintained a Buy rating with a target price of ₹85, while Morgan Stanley kept an Equalweight stance with a target price of ₹72. Motilal Oswal and Nuvama also expressed confidence in the bank’s medium-term prospects, emphasizing margin stability and credit cost moderation.
According to Jefferies, IDFC First Bank reported a Q2FY26 PAT of ₹3.5 billion, up 76% year-on-year and slightly ahead of estimates. The brokerage noted that slippages in the microfinance (MFI) book halved sequentially, while asset quality remained steady across core segments. Jefferies added that a ₹75 billion capital raise via CCPS will lift the bank’s CET-1 ratio to a healthy 15%, further strengthening its balance sheet.
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Morgan Stanley, meanwhile, retained a neutral tone, highlighting strong balance sheet growth and improving credit cost metrics. It believes the bank’s NIMs have likely bottomed out, paving the way for gradual earnings rebound. The brokerage expects Return on Assets (ROA) to rise from 0.4% in FY25 to 1% by FY27, driven by operational leverage and lower slippages.
Motilal Oswal also reaffirmed its Buy rating with a target price of ₹80, citing steady improvement in profitability and capital efficiency. The report noted that while NIMs declined only 12 bps sequentially, CASA mix improved to 50%, indicating resilience in deposit mobilization. The management expects credit costs to ease to 1.8% in the second half of FY26.
Nuvama maintained a Hold rating with a target price of ₹68, pointing to reduced pain in the MFI segment and better loan growth than peers. The brokerage highlighted that despite declining MFI exposure, overall business growth remains solid, with 6% QoQ rise in loans and 5% QoQ growth in deposits. Nuvama added that the bank’s decision not to cut savings account rates signals a focus on improving long-term LDR (Loan-to-Deposit Ratio).
| Brokerage | Rating | Target Price (₹) | Key Observation |
|---|---|---|---|
| Jefferies | Buy | 85 | Earnings beat; strong capital infusion ahead |
| Morgan Stanley | Equalweight | 72 | ROA improvement expected; NIM bottoming |
| Motilal Oswal | Buy | 80 | CASA mix at 50%; credit costs easing |
| Nuvama | Hold | 68 | MFI stress easing; prioritizing LDR over short-term margins |
Brokerages agree that IDFC First Bank is transitioning toward a more stable earnings profile, supported by healthy growth, falling credit costs, and strong retail liability franchise. While short-term NIM pressure persists, most analysts view FY26 as an inflection year for sustained profitability improvement.
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With better capital adequacy, a diversified loan book, and consistent growth across retail and SME segments, IDFC First Bank’s fundamentals appear to be strengthening. The street expects continued operational efficiency gains and steady ROA improvement through FY27.
Investor Takeaway
Indian-Share-Tips.com Nifty Expert Gulshan Khera, CFP®, who is also a SEBI Regd Investment Adviser, believes IDFC First Bank is in a strong structural uptrend. The ongoing capital strengthening and margin stabilization make it a compelling pick among mid-tier private banks for long-term investors.
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Related Queries on IDFC First Bank
- Why Did Jefferies and Motilal Oswal Maintain a Buy on IDFC First Bank?
- What Are the Key Drivers Behind IDFC First Bank’s Recovery in FY26?
- How Are Brokerages Assessing IDFC First Bank’s NIM and Credit Cost Trends?
SEBI Disclaimer: The information provided in this post is for informational purposes only and should not be construed as investment advice. Readers must perform their own due diligence and consult a registered investment advisor before making any investment decisions. The views expressed are general in nature and may not suit individual investment objectives or financial situations.
