Federal Bank climb as global brokerages retain positive stance, see 33% upside

Global research and broking firm Citi has maintained its buy call on the stock with target at Rs 165 per share, an upside of 25 percent from current market price while Morgan Stanley has retained its overweight rating on the stock with target at Rs 175 per share, an upside of over 33 percent from current level.

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Shares of Federal Bank were in focus in the early hours of March 1 after global brokerages maintained positive stance on the stock.

Global research and broking firm Citi has maintained its ‘buy’ call on the stock with target at Rs 165 per share, an upside of 25 percent from current market price.

According to the research firm, the bank is gearing towards orbit shift while execution is the key. The bank has articulated strategy on enhanced distribution with diversified mix.

“Federal Bank is leveraging digital and fintech partnerships and pivoting towards high margin products. It will be important to watch out for ensuring cost, capital and credit efficiency. Narrowing Return on Assets (RoA) gap with peers is also a key to watch out for,” Citi added.

Morgan Stanley on the other hand has retained its overweight rating on the stock with target at Rs 175 per share, an upside of over 33 percent from current level. The brokerage firm believes that the bank has improved RoA by 20 bps over the last three years, in-line with 2020 guidance.

The bank noted further improvement led by better loan mix with higher fee and assets which will offset cyclical moderation in H2 FY24 margin, it said.

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The key focus area for the bank over the next three years is to improve loan mix towards higher margin assets, Morgan Stanley added.

UBS however has a neutral rating on the stock with target at Rs 155 per share. “Management is optimistic on key business drivers and has reaffirm NIM and RoA guidance,” it said.

The private lender reported its highest-ever net profit of Rs 804 crore during the quarter that ended December 2022, up 54 percent compared to Rs 522 crore in the same quarter in the previous fiscal year. The bank’s net interest income for the quarter ended December 31, 2022, grew by 27.14 percent to Rs 1,956 crore from Rs 1,539 crore for the third quarter of FY23.

Federal Bank’s net interest margin rose to 3.49 percent during the December 2022 quarter, higher by 22 bps YoY and 19 bps QoQ. Its loan growth was at 4.3 percent QoQ.

At 10:12am, Federal Bank traded at Rs 131.55, up Rs 2.45, or 1.90 percent, on the BSE. It touched an intraday high of Rs 131.55 and an intraday low of Rs 129.45.

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