Federal Bank Ltd. share price target

Federal Bank (FB) has demonstrated strong business growth and is rebalancing its portfolio toward medium- and high-yielding segments like LAP, used CVs, gold loans, and credit cards to drive profitability.

We met new MD and CEO KVS Manian and Consumer Banking Head Virat Diwanji (ex-KMB), who gave assurance of their unwavering focus on addressing Federal Bank (FB)’s long-time pain point (margin) mainly via CASA acceleration.

Quarterly Update Q4FY25

FB reported a soft quarter as core PPoP at Rs12.6bn missed PLe by 11% driven by 4.2%/3.9% miss on NII/opex. However, lower provisions (led by corporate recovery) cushioned core PAT which met PLe at Rs8.7bn. In-line with its stated strategy, CA accretion was healthy QoQ. NIM may moderate as 50% of loans are EBLR linked with a T+1 reset. However, it may be cushioned by 1) shift to higher yielding segments 2) change in EBLR reset dates for new disbursals to T+90 and 3) growing fixed rate loans at a higher pace. Opex has been a drag;...

We maintain our BUY recommendation on the stock.

Federal Bank (FB) reported 4QFY25 earnings of INR10.3b (12% beat) amid lower provisions and healthy other income. NII was in line, while NIM stood broadly flat (up 1bp QoQ to 3.12%), as the bank focused on reorienting its asset mix with the goal of improving yields and increasing its CASA deposits.

Q4FY25 numbers were a mixed bag. NII at Rs. 2,377 grew by 8% y-o-y/ down 2% q-o-q. Net interest margin (NIMs) were stable, improved marginally by 1 bps q-o-q to 3.12% despite spreads under pressure (down 13 bps q-o-q.

Strong growth in non-interest income was counterbalanced by weak NII and higher opex which led to ~3% sequential de-growth in core operating profits for Federal bank.

We recommend a BUY rating on the stock with a target price of Rs 213/share, implying an upside of 10% from the CMP.

We attended Federal Bank analyst day, where in Mr. K.V.S Manian, the recently appointed MD& CEO, presented its strategy.

We attended the Analyst Meet hosted by Federal Bank to chalk out the strategy and growth roadmap for the bank under the new management, spearheaded by Mr KVS Manian, along with insights from other senior management team members of the bank.

MD&CEO Mr. Manian well articulated FB's medium-term strategy (FY25-28E) which includes CASA/NIM/fee expansion and opex efficiency. Branches would be re-oriented to be more customer centric and sales driven. FB aspires to be among the top pvt. sector banks by improving return ratios which would entail superior balance sheet management by focusing on profitable growth and better asset/liability mix. FY24 NIM/core RoA was 3.1%/1.1% while for larger peers it ranged between 3.5-4.9% and 1.6-2.3% suggesting that execution and...

FB plans to grow advances 1.5x nominal GDP growth in the next three years

After the course correction in 3Q, Federal Bank hosted an analyst meet to unveil its long-term (next 3-5 years) business strategy (Plan 4.0) under the aegis of new MD & CEO KVS Manian (ex-Kotak), per which it plans to strengthen its core and tweak its asset/liability profile toward delivering sustained RoA of over 1.4% from 1.2% now.

Federal Bank (FB) hosted its analyst meet, presenting a strategic vision under the leadership of MD & CEO Mr. KVS Manian to position itself among the top five private sector banks in India.

We maintain our BUY recommendation on the stock

Under new MD Manian (ex-Kotak), Federal has adopted a risk calibrated growth strategy from 3Q itself (down to 16% YoY from a high of 19-20%), and made accelerated provisions (Rs2.9bn) leading to a 10% miss on PAT at Rs9.6bn (1% RoA).