Analysts up Federal Bank targets after strong Q3

Mumbai: Analysts remain bullish on Federal Bank and raised their price targets on the stock after the private sector lender posted a 54% jump in net profit in the December quarter driven by higher net interest income and improvement in asset quality.

The stock has the potential to rise by 12-35% from current levels as per analysts' fresh price targets after the results. On Tuesday, shares of Federal Bank fell 1.1%, surrendering early gains, to close at ₹138.75. It had touched an all-time high of ₹143.40 on Monday.

Federal Bank - at 1.1 times its one-year forward price-to-book - is attractively valued, said Morgan Stanley. "We stay positive and expect continued improvement in profitability. Loan spreads have improved sharply in 9MFY23, and will improve further before moderating in FY24," the financial services firm said in a client note.

Of the 22 analysts that actively track the stock, 21 have a 'buy' rating. Investec, which also had a 'buy' rating on the stock before the release of third-quarter earnings, downgraded the stock to 'hold', showed a Bloomberg poll of analysts.

Motilal Oswal said the stock remains its preferred pick among mid-sized banks. "We raise our estimates by 5-7% as we build in higher margins and provisions... Estimate it to deliver RoA (return on assets)/RoE (return on equity) of 1.3%/15.2% in FY25," the brokerage said in a client note.