'Buy' Federal Bank To Get An Upside Of 19%, Says IDBI Capital — Here's Why

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IDBI Capital Report

We attended the analyst day hosted by Federal Bank Ltd. where the newly appointed MD and CEO K.V.S. Manian and the top management shared the medium term strategies for the bank.

The top three priorities of the bank will be to grow the CASA deposits, fee income to boost NIM expansion. While there could be short term pressure on the margins due to rate cut, the bank believes the medium term story for the bank remains positive.

By diversifying its product line and breaking into new financial product categories like asset management, capital markets, investment banking, etc., the bank hopes to become a "Universal Bank."

The management maintained its guidance of growing 1.5x the GDP growth rate of the country.

We expect deposit to grow at 14% CAGR and credit growth to be 15% CAGR (FY25-27).

We maintain our estimates and a Buy rating on the stock with a target price of Rs 215 based on 1.3 times P/ABV FY27.

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