'Buy' Federal Bank Shares Maintains Motilal Oswal, Revises Target Price — Here's Why

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Motilal Oswal Report

The Federal Bank Ltd.’s focus on asset mix diversification and operational efficiency has boosted its resilience against macro volatility. While challenges persist, Federal Bank’s conservative credit stance, robust provisioning, and customer engagement strategies offer a well-defined roadmap to steady growth.

With ongoing liability optimization, focus on improved asset mix, and controlled credit cost, the bank is on a path to improved profitability. Its CASA initiatives, branch rationalization, and tech investments provide scalability while keeping costs under control.

Federal Bank trades at 1.2x FY27E adjused book value, thereby offering an attractive opportunity for investors seeking stable, risk-adjusted returns.

Management’s guidance points to a gradual margin recovery, with credit costs contained at around 55bp (recovery in H2) and sustained growth in granular lending segments.

We expect Federal Bank to deliver 1.2% RoA in FY27, with further improvement to be witnessed in FY28 at 1.3%.

We estimate the bank to clock ~27% PAT CAGR over FY26-FY28. We remain optimistic about Federal Bank’s execution and delivery, and reiterate a Buy rating with a revised target price of Rs 235 (premised on 1.5x FY27E BV).

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