UBS initiates coverage on IDFC First Bank with neutral call, cites profitability constraints despite 12% upside
has initiated coverage on
IDFC First Bank
with a 'neutral' rating and a target price of Rs 85, implying a potential upside of nearly 12% from current levels. The brokerage flagged structural profitability challenges, driven by elevated credit costs and operating expenses, that may cap returns despite sectoral tailwinds and growth in core operations.
The brokerage pointed to 'limited ROA upside due to persistently high credit costs and elevated operating expenses.' While it acknowledged that stable net interest margins (NIMs) and a supportive sectoral backdrop should aid the bank's growth trajectory, UBS said it expects the return on assets to 'remain around 1% by FY27.'
by Taboola
by Taboola
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Shares of IDFC First Bank were trading 0.9% lower at Rs 75.98 on the BSE on Friday, July 11.
The stock has delivered an 18.5% gain in 2025 so far, with a 26% rise over the last six months and a 6.7% increase in the past month. However, on a one-year basis, the stock remains 2.8% lower.
Technical trend remains supportive
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From a technical standpoint, the stock is currently trading above six of its eight key simple moving averages (SMAs), including the 20-day, 30-day, 50-day, 100-day, 150-day, and 200-day SMAs. It is, however, below its 5-day and 10-day SMAs.
The Relative Strength Index (RSI) stands at 67.5, just shy of the overbought threshold of 70, while the Moving Average Convergence Divergence (MACD) is at 2.3, staying above both the center and signal lines—indicators that suggest a continuation of the current bullish trend.
Interim dividend declared after seven years
Separately,
IDFC First Bank shares
are trading ex-dividend on Friday after the board declared an interim dividend of Rs 0.25 per share for FY25. The record date to determine eligible shareholders has been fixed as July 11.
The bank had declared the dividend in an exchange filing back in April. This marks the first time in nearly seven years that the bank is trading ex-dividend. According to BSE records, the previous instance was on July 23, 2018, when the bank paid a final dividend of Rs 0.75 per share.
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