The BFSI sector has been a key outperformer of CY22 and has witnessed a healthy retracement in the last three months, thus forming a higher base for the next leg of up move with The mid-small cap banks are now seen catching up with their large cap peers. Within private banking space, brokerage ICICI Direct is positive on IDFC First Bank, which it expects to outperform over the next few months.


“IDFC First Bank has been delivering well on its guidance across parameters. With balance sheet restructuring largely done, pedalling growth with entry in new segment (digital, gold, personal loans and credit cards) is in focus. Key variable to drive further improvement in return ratios is improvement in CI ratio from current 73.3% to targeted 55% in FY25E. Thus, strong retail execution, steady credit cost and improving efficiency should drive RoE at 10-12% in FY24-25E and thus valuation,” the note stated.

“We expect the stock to resume up move after last three months breather and head towards ₹64 levels (target price) as it is the high of December 2022. Among oscillators, the weekly stochastic is rebounding from the oversold territory and has generated a buy signal, thus validating positive bias,” ICICIDirect added.

IDFC First Bank shares are currently trading near their 52-week high level of ₹64 apiece that it had hit in December 2022 on the BSE. IDFC First Bank was formed by the merger of the erstwhile IDFC Bank and Capital First in 2018. The bank stock is up more than 42% in a year’s period.

“Rising retail mix, focus towards high yield segment and replacement of high cost borrowings with relatively lower cost deposits to enable steady margin at 6%. Improvement in GNPA at 3.18% coupled with adequate provision buffer on legacy infrastructure exposure provides confidence on credit cost remaining at 1.5-1.7% in FY23-24E,” the brokerage added.



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