Buy Federal Bank; target of Rs 139: Axis Direct

Trade

• Watchlist
• Portfolio
• Message
• Set Alert

 

 

Choose Stock Exchange: BSE LIVE NSE LIVE

26 Aug, 2025 12:21

Volume

Todays L/H

More

×

Axis Direct's research report on Federal Bank

Post a marginal blip in asset quality performance in Q1FY18, Federal Bank (FB) reported strong earnings in Q2FY18 at Rs 264 cr, which grew by 26% QoQ, supported by strong loan growth and steady NIM. Loan growth remained high at 25% YoY (6% QoQ), better than industry average, with a 39% jump in corporate loan book. The management has guided for the strong momentum to continue in FY18E and remains confident of improving growth from the Retail/SME segment.

Outlook

We expect advance growth at 23% CAGR for FY17-19E led by growth in Corporate, SME and Retail portfolio. FB continues to garner strong NRE inflow and has one of the best CASA deposit ratios among regional banks. Top-level management changes have already been witnessed by way of healthy as well as quality corporate loan growth. Going forward, management’s focus would be on containing slippages from its corporate book, reduce its cost of borrowings and also increase lending towards retail and SME. Management have identified and addressed largely stressed accounts and decline in SMA II exposures, no major stressed assets in the form of SDR, S4A and 5:25 supports asset quality going forward. We value FB at FY19E P/ABV multiple of 2.2x to arrive at target price of Rs 139/share with BUY rating.

For all recommendations report, click here

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

Read More