Synopsis: HSBC initiated coverage on IDFC First Bank with a Buy rating, citing strong loan growth, improving profitability, and operating leverage, while projecting a 23% upside potential.
This Mid-Cap Private Sector Bank, engaged in providing retail banking, corporate banking, wealth management, digital banking, loans, deposits, and financial services across India, is in focus after HSBC gave a buy target of Rs. 90, which has an upside potential of 23.37 percent.
With a market capitalization of Rs. 63,462.40 crore, the shares of IDFC First Bank Limited were currently trading at Rs. 73.70 per equity share, rising nearly 1.03 percent from its previous day’s close price of Rs. 72.95 per share.
Reason Behind the Surge
HSBC, a prominent brokerage firm, has recommended a “Buy” call on IDFC First Bank Limited with a target price of Rs. 90 per share, indicating an upside potential of 23.37 percent from its previous day’s closing price of Rs. 72.95 per share.
HSBC has initiated coverage on IDFC First Bank with a Buy rating, highlighting the bank’s strong long-term growth potential. The brokerage expects the bank’s loan book (advances) to grow at a CAGR of around 20 percent between FY26 and FY29, driven by steady expansion across retail and business banking segments. HSBC also forecasts the bank’s core Pre-Provision Operating Profit (PPOP) to grow at a strong CAGR of 35 percent during FY26-FY29, reflecting improving profitability and business scale.
A key reason for HSBC’s positive view is the bank’s ability to benefit from operating leverage, where revenue is expected to grow faster than expenses. As the business scales up, fixed costs will be spread over a larger asset base, leading to stronger earnings growth. HSBC expects this to result in improving Return on Assets (RoA) and Return on Equity (RoE) over the next few years, supporting a robust earnings trajectory and higher shareholder value.
However, HSBC has also highlighted some risks. If the bank fails to control costs and meet its cost guidance, profitability could be impacted. Additionally, further capital raising may dilute returns and put pressure on RoE. The brokerage believes that a meaningful improvement in RoE will be essential for IDFC First Bank to achieve higher valuation multiples and sustain long-term stock performance.
Management Guidance
IDFC First Bank’s management expects FY27 to be a stronger year, with revenue growth of around 18-18.5 percent as pressure from the microfinance segment reduces and growth expands across other businesses.
The bank also expects better operating leverage, with income growing faster than expenses. In addition, management is targeting lower credit costs of around 170-180 basis points, supported by CGFMU coverage, which should help improve profitability and support stronger earnings growth.
Company Overview
IDFC First Bank Limited is an Indian private sector bank formed through the merger of IDFC Bank and Capital First in December 2018. It offers retail, corporate, and wholesale banking services, emphasizing technology-led operations and customer-centric retail growth. The bank is noted for its focus on inclusive finance and competitive deposit rates.
Recent Quarter Results
Coming into financial highlights, IDFC First Bank Limited’s Net Interest Income has increased from Rs. 4,907.61 crore in Q4 FY25 to Rs. 5,677.24 crore in Q4 FY26, which has grown by 15.68 percent. The net profit has also grown by 11.85 percent from Rs. 295.6 crore in Q4 FY25 to Rs. 330.64 crore in Q4 FY26.
In terms of return ratios, the company’s ROCE and ROE stand at 5.99 percent and 3.84 percent, respectively. IDFC First Bank Limited has an earnings per share (EPS) of Rs. 1.90, and its debt-to-equity ratio is 7.04x.
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