Buy Federal Bank; target of Rs 250: Emkay

Emkay is bullish on Federal Bank has recommended buy rating on the stock with a target price of Rs 250 in its research report dated July 24, 2024.

Broker Research

July 26, 2024 / 15:52 IST

BUY

26 Aug, 2025 12:21

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Emkay's research report on Federal Bank

Federal Bank has posted strong credit growth of 20% YoY, defying industrywide moderation; but margin slipped a bit, as expected, by 5bps QoQ to 3.15% as loan yields remain stunted. However, higher recoveries from written-off accounts + PSLC fees, partly offset by higher opex/provisions, helped the bank deliver RoA of 1.3%. Slippages were seasonally higher in retail/agri, but overall asset quality is holding up well, with GNPA ratio at 2.1%. After a nail-biting wait, the RBI has finally cleared KVS Manian as the new MD and CEO (wef 23- Sep-2024), who will replace existing MD/CEO Shyam Srinivasan. We believe Manian’s experience in building the retail/corporate book at a large bank (Kotak Bank) would help sweat Federal Bank’s otherwise strong platform and thus deliver better growth/margin-driven higher RoAs/RoEs, hence calling for higher valuations similar to those for IDFCB/CUBK.

Outlook

We retain BUY, hoisting our TP to Rs250/sh (Rs200 earlier), rolling forward to 1.5x Jun-26E ABV (from 1.3x), and the subsidiary at Rs14/share.

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