Buy Federal Bank; target of Rs 110: Motilal Oswal

Motilal Oswal is bullish on Federal Bank has recommended buy rating on the stock with a target price of Rs 110 in its research report dated July 17, 2018.

Broker Research

September 18, 2018 / 15:26 IST

26 Aug, 2025 12:21

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Motilal Oswal's research report on Federal Bank

FB reported PPoP growth of 2.4%/8.1% QoQ/YoY to INR6b (in-line), as the 3% beat on NII (+5%/+22% QoQ/YoY to INR9.8b) was offset by the 7% miss on other income (-14%/-18% QoQ/YoY to INR2.7b). Lower-than-expected provisions of INR1.9b (-46%/-16% QoQ/YoY) led to PAT of INR2.6b (5% beat). NIM was flat at 3.12% (+1bp QoQ). Yields declined marginally (-2bp) to 9.11%, while cost of deposits declined to 5.64% (-12bp QoQ). Loan growth of 2.5%/24% QoQ/YoY was led by 31% YoY growth in corporate book, while retail and SME loans also maintained healthy traction (+19%/+17% YoY). Deposits grew 16% YoY to INR1.25t. CASA ratio stood at 33.47%.

Outlook

We believe FB's asset quality concerns, which are largely legacy issues, have been largely recognized. Considering asset quality distractions in the PSU space, we believe FB is well positioned to gain market share in highly rated corporates. Proceeds from stake sale in Fed-Fina and IDBI Federal (not factored in our estimates) could provide upside. We reiterate Buy with a target price of INR110 (1.7x FY20E ABV).

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