LKP Research's research report on Federal Bank
Federal Bank delivered a decent quarterly performance, supported by a sustained growth in its loan portfolio. Going forward, the loan growth is expected to moderate in the near term as the bank has decided to curb the growth of its unsecured loan portfolio. The bank’s profit was impacted due to one-time provision expense made in advance for future nonperforming loans. In addition, the bank has implemented various strategic measures for garnering high-quality deposits, which has resulted in a steady NIM despite rising cost of funds.
Outlook
Moreover, the bank improved its asset quality in a challenging macro environment, and is expected to remain strong with excess provisioning and tightening underwriting in the unsecured lending space. Hence, we assign a BUY rating on the stock, based on 1.2x FY27E BVPS with a target price of ₹213.
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