Four factors why Nomura sees a 25% upside on IDFC First Bank shares

Brokerage firm Nomura has initiated coverage on shares of Mumbai-based private lender IDFC First Bank Ltd. in its latest note on Wednesday, January 7.

Nomura recommended a "buy" rating on the stock with a price target of ₹105, which implies an upside potential of 25% from Tuesday's closing levels. The brokerage has cited four key reasons as to why it is bullish on the stock.

IDFC First Bank has shifted from a multi-year investment and balance sheet transition phase to one of sustained, broad-based profitability, Nomura wrote in its note as one of the key factors behind its bullish stance.

The lender has also built a strong liabilities franchise, and has structurally shifted from a wholesale-led lender to a granular retail-focused model, according to Nomura's note.

Growth visibility for IDFC First Bank remains strong and Nomura believes that its loan and deposit growth will grow at a Compounded Annual Growth Rate (CAGR) of 20% and 22% respectively over financial year 2026-2028.

IDFC First's fee income profile is more than 2% of its average assets and is superior to peers, the note added further.

Nomura expects IDFC First Bank to deliver a 39% core-Pre-Provisioning Operating Profit CAGR over financial year 2026-2028, driven by a 50 basis points moderation in cost-to-assets and a 14 basis points improvement in NIMs.

This, alongside a 35 basis points decline in credit costs, should help the lender's Return on Assets (RoA) improve to 1.2% and Return on Equity (RoE) to improve to 11.8% by financial year 2027, which will aid a sector-leading EPS CAGR of 67% over the same time period, Nomura said.

29 analysts have coverage on IDFC First Bank, of which 19 have a "buy" rating, six say "hold" and four have a "sell" recommendation.

Shares of IDFC First Bank ended little changed on Tuesday at ₹84.78. The stock is up 36% over the last 12 months.