IDFC First Bank has received a strong endorsement from Nomura, with the brokerage firm issuing a Buy rating and setting an ambitious target price of ₹105 per share. This recommendation suggests an upside potential of 22.02% from the bank's previous closing price of ₹86.05, reflecting confidence in the institution's growth trajectory and operational improvements.

Strong Financial Performance in Q2 FY26

The Mumbai-based private sector bank demonstrated robust financial performance in its recent quarterly results. The bank's operational metrics showed significant improvement across key parameters:

The bank's three-year performance trajectory remains impressive, with Net Interest Income and net profit growing at CAGRs of 25.73% and 124.16% respectively over the last three years.

Nomura's Growth Projections and Rationale

Nomura's optimistic outlook is anchored on several key factors that position IDFC First Bank for sustained growth. The brokerage expects the bank's loan and deposit base to expand at healthy compound annual growth rates of approximately 20% and 22% respectively during FY26-FY28, indicating sustained momentum in core banking operations.

The bank's fee income remains a notable strength, standing at over 2% of average assets, which exceeds most peer institutions and supports stable earnings generation. Nomura anticipates a sharp improvement in profitability as credit costs decline by around 35 basis points.

Profitability and Efficiency Improvements

The brokerage firm projects significant enhancements in key profitability metrics over the medium term:

Nomura forecasts a sector-leading EPS CAGR of nearly 67% over FY26-FY28, driven by improving operational efficiency and declining credit costs.

Current Business Metrics and Asset Quality

IDFC First Bank maintains a strong operational foundation with loans and advances of ₹2,66,579 crore and customer deposits of ₹2,69,094 crore. The bank's asset quality remains healthy with GNPA at 1.86% and NNPA at 0.52%. The institution's focus on low-cost funding is evident from CASA deposits of ₹1,38,583 crore and a robust CASA ratio of 50.10%.

Credit Cost Outlook and Operational Leverage

Credit costs for IDFC First Bank are expected to improve steadily, declining from 2.60% in FY25 to 2.10% in FY26, and further to 1.90% in FY27 and 1.80% in FY28. While operating expenses remained elevated during FY19-FY25 due to investments in branches, manpower, technology, and new businesses, operating leverage is now beginning to emerge. Net interest margins, which faced pressure in FY25-H1FY26, are expected to bottom out in FY26 and gradually recover thereafter, supporting the bank's overall profitability improvement trajectory.

IDFC First Bank has announced substantial reductions to its savings account interest rates, cutting rates by up to 200 basis points across select balance slabs. The revised rate structure, effective January 9, represents one of the most significant rate cuts by a private sector lender in recent months.

Major Rate Reductions Across Key Slabs

The bank's restructured interest rate framework shows considerable changes across multiple balance categories:

The most significant impact falls on the ₹1 lakh to ₹10 lakh segment, which previously earned 7.00% under the bank's ₹5 lakh to ₹5 crore slab structure. This popular bracket had been instrumental in attracting substantial inflows from retail and high-value customers.

Market Context and Timing

The rate adjustments come during a challenging period for deposit mobilization across the banking sector, with institutions struggling to attract deposits amid robust credit growth. The Reserve Bank of India recently reduced the policy repo rate by 25 basis points, bringing total rate cuts in 2025 to 125 basis points.

For customers, these changes signal reduced returns on savings deposits and may encourage movement of surplus funds toward alternative investment options offering higher yields.

Interest Calculation Framework

IDFC First Bank confirmed that savings account interest will continue to be calculated on a progressive basis, where different portions of account balances earn interest at their respective slab rates. The bank will credit interest monthly and compute it based on daily end-of-day balances, maintaining compliance with Reserve Bank of India regulations.

The restructured rate card reflects the bank's strategic adjustment to current market conditions while balancing deposit costs with lending margins in the evolving interest rate environment.