UBS Upgrades IDFC First Bank: Target Price Raised to Rs 92

UBS has revised its rating for IDFC First Bank, upgrading it to ‘neutral’ from ‘sell’ and increasing the target price from Rs 78 to Rs 92. This move reflects an improving earnings outlook and enhanced asset quality for the private sector lender.

Key Metrics and Projections

• New Target Price: Rs 92 (previously Rs 78)
• New Rating: Neutral (previously Sell)
• Projected Net Interest Margins (FY27-29E): 5.8%
• Expected RoA Cap (FY27-29): 1.1-1.2%

IDFC First Bank delivered a robust performance in the first quarter of financial year 2027, reporting its highest-ever quarterly net profit. This strong showing contributed to the brokerage’s positive assessment of the bank’s trajectory.

• Q1 FY27 Net Profit: Rs 1,075 crore (more than doubled year-on-year)
• Net Interest Income: Rs 5,972 crore (up 21%)
• Operating Profit: Rs 2,553 crore (up 14%)
• Return on Assets (Q1): Over 1%

The bank also demonstrated significant improvements in its asset quality during the quarter. Gross Non-Performing Assets (NPA) declined sequentially to 1.51%, while Net NPA reduced to 0.44%.

Analyst Observations

UBS analysts anticipate that IDFC First Bank’s continued branch expansion will be a primary driver for business growth. They position the bank as a potentially key beneficiary among India’s mid-sized banking institutions.

• Earnings Outlook: Improving
• Asset Quality: Improving despite a one-off fraud incident earlier in the year
• Credit Costs: Expected to moderate
• Cost-to-Income Ratio: Elevated at 66%, capping RoA expansion

Despite the concern over the elevated cost-to-income ratio, the brokerage’s revised outlook underscores a positive trajectory for IDFC First Bank’s financial health. Stable Net Interest Margins and moderating credit costs are expected to support future performance.