Federal Bank shares rose over 3% today after global brokerages maintained positive stance on the stock. Federal Bank shares touched an intraday high of Rs 133.05, rising 3.06% on BSE. Market cap of the bank rose to Rs 28,041 crore on BSE. The stock has gained 4.52% in the last three days. Federal Bank stock has risen 36.77% in one year but lost 4.57% since the beginning of this year.
Total 2.19 lakh shares changed hands amounting to turnover of Rs 2.88 crore on BSE.
In terms of technicals, the relative strength index (RSI) of the stock stands at 46.8, signaling the stock is neither oversold nor overbought. The banking stock has a one-year beta of 1.1, indicating high volatility during the period. Federal Bank shares are trading higher than the 5 day, 20 day, 50 day, 100 day and 200 day moving averages.
Global brokerage UBS has a neutral rating on the stock with a target of Rs 155 per share. “Management is optimistic on key business drivers and has reaffirm NIM and RoA guidance,” it said.
Global research and broking firm Citi has maintained its ‘buy’ stance on the stock with a target of Rs 165 per share. This amounts to a target of 25 per cent from the current market price. The bank is gearing towards orbit shift while execution is the key. The lender has articulated a 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.
On the other hand, Morgan Stanley has retained its overweight stance with a target of Rs 175 per share. This amounts to an upside of over 33 percent from the current level. The brokerage firm believes 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 a better loan mix with higher fee and assets, which will offset cyclical moderation in H2 FY24 margin, it said.
The key focus area for the lender over the next three years is to improve loan mix towards higher margin assets, Morgan Stanley added.
In the third quarter of the current fiscal, Federal Bank reported its highest-ever net profit of Rs 804 crore, up 54% compared to Rs 522 crore in the corresponding quarter in the previous fiscal. Net interest income in Q3 climbed 27.14% to Rs 1,956 crore from Rs 1,539 crore for the third quarter of FY23. Other income grew by 10.29% to Rs 534 crore in the quarter ended December from Rs 484 crore in Q3FY22.
Further, Federal Bank’s net interest margin or NIM rose to 3.49% during the December 2022 quarter, higher by 22 bps year-on-year (YoY) and 19 bps quarter-on-quarter (QoQ). Its loan growth was at 4.3% QoQ 17.1% from the year-ago quarter.
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