A Potential Upside Of 27% From This Private Bank Stock That Hiked Rates Few Days Ago

IDFC First Bank, an Indian private sector bank recently announced rate hike on savings account, effective from February 15, 2023 after RBI increased repo rate by 25 basis points to 6.50%. Additionally the bank increased the interest rates even on fixed deposits and receurring deposits, effective from March 1, 2023.

For savings account, amount below Rs 10 crore will earn an interest of 4%. The customers having an account balance of more than Rs 10 lakhs up to Rs1 crore, can now get an interest rate of 6.25% and for customers having a balance amount of more than Rs1 crore up to Rs 50 crore will earn a high interest of 6.75%. Interest payable on Savings account will be calculated on a progressive basis.

On domestic retail fixed deposits for amount less than 2 crore, the bank offers interest rate of 3.5% to 7.00% for maturity term ranging from 7 days to 10 years. For 18 months-1 day to 3 years (549 days to 3 years) fixed deposit term, the maximum interest customers get is 7.75%. The incentive for Senior Citizens will be at an additional spread of 0.50% over and above the general rate.

The bank customers can open a recurring deposit account for a term ranging 6 months to 120 months. For 6 month term of RD the bank offers interest of 5%, while for a 9 month term its offers 6.75%. Also for RDs maturing in maturing in 12 months to 18 months the bank is offering an interest rate of 7.25% and for RDs maturing in 21 months to 36 months, the interest is 7.75%.

Motilal Oswal sees a potential upside of 27% from the stock price of IDFC First Bank and hence recommended investors to buy this private bank stock, with a price target of Rs 70 per share. The current market price of Rs 56.50 per share.

According to Motilal Oswal, "IDFC First Bank is focusing on growing its loan book through retail and commercial loans, which form 77% of funded assets and saw a 31% CAGR over Dec'20-Dec'22. Since the drag from the wholesale book is moderating, we expect the bank to embark on a strong growth trajectory. We estimate a 25% CAGR in loans over FY23-25. Post the recent preferential allotment of roughly 22 billion by its parent, their stake has increased to 40% from 36.4%. The book value has thus increased by 2-4% for FY23/24, while the Tier 1 ratio improved by approximately 130bp to 14.8%. We believe that the recent capital raise should help bank fund growth for atleast one year, as the bank is growing its funded assets at a healthy pace of 25%. We estimate RoA/RoE to reach 1.3%/14.0% by FY25. Maintain BUY with an unchanged TP of INR70 (1.5x Sep'24E BV).

In three years the share price increased by 50.07% and in one year it was up by 35.82%. On intraday basis it is up by 2.43% to Rs 56.50 per share, its 52 -week high is at Rs 64.30 per share and 52-week low is at Rs 28.95 per share.

The stock has been picked from the brokerage report of Motilal Oswal, Greynium Information Technologies and the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult with certified experts before making any investment decision.