Sharekhan has given Buy recommendation for Federal Bank with a target price of Rs. 140 in its research report issued on Aug 30, 2022
Sharekhan’s research report on Federal Bank
Federal Bank expects to sustain healthy performance led by an improved loan growth outlook (16-18%), steady asset quality performance, and in turn lower core credit cost. The bank has guided for credit cost ~60 bps. The bank indicated that the loan growth is expected to be broad-based across Retail, Agri, Corporate & SME. The focus is to maintain a strong granular liability franchise. A higher mix of floating loans, improving credit-deposit (CD) ratio and higher retail deposits will support margins in a rising interest rate environment.
At CMP, the stock trades at 1.2x and 1.1x its FY2023E and FY2024E ABV, which we believe is reasonable, given the improved return ratio outlook. We maintain Buy with a revised PT of Rs. 140.