Morgan Stanley retained its equal-weight rating on IDFC First Bank, with a target price of Rs 58, as Q3 FY25 profit fell short of estimates. The bank reported net profit of Rs 339.4 crore, a 52.6% YoY decline but a sharp 69.13% QoQ recovery. The miss was primarily driven by higher provisions, which rose 104.3% YoY to Rs 1337.9 crore, reflecting elevated stress in the microfinance segment.
Key metrics demonstrated mixed performance. Net interest income grew 14.4% YoY to Rs 4902.1 crore, while other income increased 17.4% YoY to Rs 1779.9 crore. Operating expenses rose 16.1% YoY to Rs 4923 crore, weighing on profitability. Operating profit was Rs 1758.9 crore, up 12.6% YoY but down 10.34% sequentially, impacted by rising costs.
Morgan Stanley flagged concerns about macroeconomic challenges and the drag from MFI, which could impact earnings in FY26 and FY27. However, it noted that IDFC First Bank outperformed peers in terms of growth and asset quality in non-MFI segments, offering a silver lining amid the challenges.
