Buy Federal Bank; target of Rs 170: Motilal Oswal

Motilal Oswal is bullish on Federal Bank recommended buy rating on the stock with a target price of Rs 170 in its research report dated January 16, 2023.

Broker Research

January 17, 2023 / 14:41 IST

26 Aug, 2025 12:21

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Motilal Oswal's research report on Federal Bank

FB reported a strong quarter with a PAT of INR8b (up 54% YoY and 13% beat), aided by lower provisions and NIM expansion even as the bank prudently increased the PCR to ~70%. Margin improved 19bp QoQ to 3.49%. Gross advances grew 19.1% YoY, led by a broad-based pickup across all business segments. Deposit growth was healthy, led by strong traction in term deposits, while CASA ratio moderated to 34.2%. Fresh slippages came in at INR4.1b (~1.1% of loans), led by a QoQ increase in the Retail segment. GNPA/NNPA ratio moderated to 2.43%/0.73%, while restructured loans too improved 20bp QoQ to ~1.8%. FB reported a RoA/RoE of 1.33%/15.91% in 3QFY23. We raise our estimates by 5-7% as we build in higher margins and provisions. FB remains our preferred pick among mid-sized banks and we estimate it to deliver a RoA/RoE of 1.3%/15.2% in FY25. We reiterate our Buy rating on the stock.

Outlook

We raise our FY23/FY24 earnings estimate sharply by 7%/5%, factoring in higher NII and lower provisions and expect an RoA/RoE of 1.3%/15.2% in FY25. We reiterate our Buy rating with a revised TP of INR170 (1.4x Sep’24E ABV).

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