Buy Federal Bank; target of Rs 225: Sharekhan

Sharekhan is bullish on Federal Bank has recommended buy rating on the stock with a target price of Rs 225 in its research report dated October 28, 2024.

Broker Research

October 29, 2024 / 14:44 IST

Buy

26 Aug, 2025 12:21

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Sharekhan's research report on Federal Bank

Federal Bank reported an 11% y-o-y growth in earnings aided by 18% y-o-y growth in operating profits and a rise in provisions on very low base. The bank managed to report RoA/RoE at ~1.3%/ ~13.7%. Core credit cost stayed lower, within the guided range at 30 bps annualised for the quarter vs 27 bps q-o-q and 13 bps y-o-y. Asset quality remained broadly stable. Net slippages were lower at 0.3% annualised vs 0.5% q-o-q. Core PPoP (ex-treasury gains) grew by 13% y-o-y. NIMs were marginally lower by 4 bps q-o-q at 3.12%. Loan growth was healthy at 19% y-o-y/ 4% q-o-q while deposit growth was at 16% y-o-y/ 1% q-o-q. Bank is confident of a 16-18% loan growth in FY25E and guided for pick up in the deposit growth. New MD & CEO would come out with a detailed strategy in Q3. Focus would be on strengthening core operating performance led by NIMs resulting in improve outlook for return ratios.

Outlook

The stock trades at 1.3x/1.1x its FY2025E/FY2026E BV estimates. We maintain our Buy rating on the stock with a revised PT of Rs. 225.

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