Federal Bank Ltd. share price target

Federal Bank reported a healthy set of Q2FY24 numbers with strong loan/core fee growth and strong asset quality, though broadly stable NIM QoQ was bit softer. Despite strong deposits franchise, Federal’s NIM performance in the current cycle has been relatively soft, which seems partly due to the bank’s pursuit for growth and pressure on the share of CASA + granular deposits.

Despite QoQ decline in NIMs and rise in provisioning, Federal Bank (Federal) reported reasonable Q1FY24 PAT of Rs8.54bn (up 42% YoY, down 5% QoQ), driven by strong ‘other income’.

We maintain our BUY recommendation on the stock.

Quarterly Update Q1FY24

Federal Bank’s Q1FY24 net profit was 42.1% in-line with our estimates driven mainly by a 35% YoY growth in operating profit. However, the stock evoked a strong negative reaction driven by continuous decline in margin by 16bps QoQ to 3.16%.

We re-iterate a BUY on the stock with a target price of Rs 155/share, implying an upside of 22% from CMP