IDFC First Bank Falls 6% in 5 Days as UBS Flags Growth Headwinds

Stock under pressure ahead of Q1 results; UBS initiates coverage with neutral rating, citing limited upside and profitability headwinds.

Shares of IDFC First Bank fell over 1% to close at ₹73 on July 11, extending their losing streak to five straight sessions, with a total decline of 6% over the period. The fall comes amid broader market weakness—Nifty 50 was down 1% in the same timeframe—but also reflects specific concerns raised by global brokerage UBS, which initiated coverage with a ‘neutral’ rating on the private lender.

Despite the recent dip, IDFC First Bank remains up 14% year-to-date, outperforming the 5% rise in Nifty 50, thanks to improved loan growth visibility and a rising deposit base in H1. However, medium-term profitability challenges flagged by UBS are weighing on near-term sentiment.

• 5-day decline: -6%

• Current price: ₹73

• YTD performance: +14% vs Nifty 50’s +5%

• UBS rating: Neutral | Target: ₹85

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UBS Sees Pressure on ROA, Margins Despite Liquidity Support

In its coverage note, UBS highlighted persistent credit costs, high operating expenses, and a sticky cost-to-income (C/I) ratio as key hurdles to ROA expansion. UBS projects ROA to remain at 1% through FY27, down from the 1.1% levels seen in FY22–24, with return on equity (ROE) also expected to stay range-bound.

UBS acknowledged that an easing liquidity environment could support growth, but cost pressures and rate sensitivity in the bank’s loan mix may neutralize those benefits. Net interest margin (NIM) is forecast to hold steady at 6.1% through FY27, even as IDFC First has adjusted lending rates by 25–125 bps to buffer rate volatility.

• Projected ROA: ~1% by FY27

• Credit costs: 2.1% (FY26), easing to ~1.9% (FY27–28)

• NIM outlook: Steady at 6.1%

• Cost-to-income ratio: High, though expected to moderate

Q1 Preview: Muted Earnings Expected Ahead of July 26 Board Meet

Looking ahead, Q1 FY26 earnings, scheduled for July 26, are expected to reflect higher provisioning and margin pressure, according to UBS. While loan growth has likely remained stable, credit costs and high opex may suppress quarterly profitability.

The bank, in its regulatory filing, confirmed that its Board of Directors will meet on July 26 to consider unaudited standalone and consolidated financial results for the quarter ended June 30, 2025.

• Next catalyst: Q1 results on July 26, 2025

• Earnings risk: High provisions and pressured margins

• Investor focus: ROA trajectory, asset quality updates, and margin commentary

Trading View: Near-Term Weakness; Watch ₹70–₹75 Zone

With a 5-day losing streak and cautious analyst tone, IDFC First Bank may see continued near-term weakness unless Q1 results surprise positively. ₹70 is a key support, while any rebound will face resistance near ₹76–₹78, where selling has emerged in previous rallies.

Watchlist:

• IDFC First Bank (₹70–₹76) – Pre-result trade setup with weak momentum

• RBL Bank, Federal Bank – Peers to watch on similar credit cost commentary

• Bank Nifty Index – Reactivity to mid-tier private bank earnings

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