IDFC First Bank Maintains Neutral Rating, Targets Rs 80: Motilal Oswal
IDFC First Bank (IDFCB) Fraudulent Transactions Report
IDFCB has reported unauthorized withdrawals of deposits amounting to INR 5.9 billion from a branch in Chandigarh, Haryana. The bank has stated that the fraud is limited to a single branch and involves a defined set of Haryana state government accounts, with evidence suggesting employee collusion. This incident is not seen as a systemic failure.
Government deposits, including state and central government accounts, comprise approximately 8-10% of IDFCB's total deposits, while Haryana state government's balance accounts for around 0.5% of total deposits. The bank has engaged KPMG as an auditor to investigate the matter, and findings will be used to determine necessary provisions in the coming quarter.
In a worst-case scenario, assuming negligible recovery, the provisioning requirement may impact 4QFY26 profit before tax (PBT) by 56%. We will review our numbers during the 4Q preview and maintain our Neutral rating on the stock with a revised price target (PT) of INR 80 (1.3x September 2027 estimated annualized book value).
Read also: Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data
Investor Takeaway
Investors should be cautious of potential provisioning requirements for IDFC First Bank due to the reported fraudulent transactions.
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