Buy Federal Bank; target of Rs 220: Sharekhan

Sharekhan's research report on Federal Bank

Federal Bank aspires to be a universal lender with a nationwide franchise and among the top 5 private sector banks over the next 3-5 years. It is eyeing an improvement in the return ratios (RoA/RoE) that is closer to top 3 private banks. Rise in RoA would be led by improvement in NIMs driven by better liability mix, alongside efforts to improve loan yields through mix and pricing and higher fee income contribution. The bank has set an ambitious goal but execution remains key.

Outlook

We remain assertive on the franchise from medium to long term thus maintain a Buy rating on the stock with an unchanged PT of Rs. 220. At CMP, the stock trades at 1.2x / 1.1x its FY2026E/ FY2027E BV estimates.