BofA lifts IDFC First Bank stock rating, target to INR80

On Monday, BofA Securities revised its stance on IDFC First Bank (NASDAQ:FRBA) Ltd (IDFCFB:IN), upgrading the stock from Underperform to Buy and raising the price target to INR80.00 from INR65.00. The upgrade reflects the bank’s recent capital raise, which has alleviated a significant concern for investors.

The bank’s recent actions have led to a stronger financial position, with BofA Securities noting that IDFC First Bank is now "adequately provisioned for MFI related stress," while still maintaining intact contingent buffers. This development, according to BofA Securities, could lead to potential positive surprises in credit costs for the fiscal years 2026-2027.

Analysts at BofA Securities also pointed out that IDFC First Bank has begun to meet its operational expenditure growth targets, aiming for around 13% growth in this area. They believe that continuous improvement in the cost-income rate will be crucial for enhancing investor confidence in the bank’s Return on Assets (RoA) trajectory.

IDFC First Bank is also positioned to benefit from the rate cut cycle, with 60% of its loan book being at a fixed rate. BofA Securities has adjusted its valuation approach for the bank, now applying a 1.1-1.2x Price-to-Book (P/B) Derived Discounted Dividend Model (DDM) target multiple. This change is due to increased visibility on the bank’s growth and Return on Equity (RoE).

The report concludes with the anticipation that IDFC First Bank will continue to outperform its private bank peers in terms of growth. However, BofA Securities suggests that further improvements in the bank’s RoE trajectory and visibility will be necessary to fuel the next phase of re-rating for the stock.

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