Jefferies reiterated its buy rating on IDFC First Bank share price with a target of Rs 73, despite challenges in Q3 FY25. The bank reported a net profit of Rs 339.4 crore, down 52.6% year-on-year (YoY) from Rs 715.7 crore, but up 69.13% sequentially from Rs 200.7 crore in Q2 FY25. The profit miss was attributed to slower topline growth and rising credit costs, with microfinance (MFI) operations acting as a significant drag on earnings.
Net interest income (NII) rose 14.4% YoY to Rs 4902.1 crore from Rs 4286.6 crore and increased 2.4% quarter-on-quarter (QoQ). Other income grew by 17.4% YoY to Rs 1779.9 crore, a sequential rise of 3%. However, operating profits were Rs 1758.9 crore, marking a 12.6% YoY increase but a 10.34% sequential decline. Provisions stood at Rs 1337.9 crore, up a staggering 104.3% YoY, though they fell 22.75% QoQ, reflecting pressure in the MFI portfolio.
Jefferies noted that MFI continues to weigh on profitability, with pain likely to persist for 2-3 more quarters. However, other segments, including retail and corporate, remain stable with sound asset quality, providing some reassurance. Management’s focus on operational leverage amid weaker topline growth was highlighted as a positive, but the brokerage cut its FY26-27 earnings estimates by 8-10%, citing the near-term challenges in MFI.
