Federal Bank share prices ended down nearly 2% on February 25. The stock is down nearly 7% in 1 month and 11% so far in 2025. However, leading brokerages remain optimistic about the bank’s long-term potential, maintaining a “Buy” rating. According to them, the bank’s strategic roadmap, which focuses on expanding its reach, improving profitability, and strengthening its position among India’s top private banks remains a key factor.
Here’s a closer look at the key factors driving this positive outlook. Motilal Oswal on Federal Bank: Growth, profitability, and digital expansion
Federal Bank is gearing up for a major transformation under the leadership of its new MD & CEO, KVS Manian, as per the latest development of the lender. The brokerage firm Motilal Oswal has maintained a “BUY” rating with a target price of Rs 225, based on 1.4x its estimated book value for September 2026.
According to the brokerage firm, the bank is focusing on a balanced strategy of scaling operations while improving profitability. “With a 93-year legacy and strong roots in Kerala, Federal Bank is now aiming for sustainable growth through better-yielding loans, a stronger deposit base, and enhanced digital capabilities,” the brokerage added in its report.
The brokerage expects the bank to achieve an earnings CAGR of 19% over FY25-27, with a Return on Assets (RoA) of 1.3% and Return on Equity (RoE) of 14.6% by FY27. Furthermore, it noted in its report that the key focus area is expanding its high-yielding loan portfolio while maintaining stable asset quality.
ALSO READCLSA’s top telecom pick Bharti Airtel up 44% in 1 year- 4 big triggers for the stock now JPMorgan on Federal Bank: Aiming for higher returns, but challenges remain
The brokerage firm JPMorgan remains “Overweight” on the stock, citing its strong liability franchise and stable deposit base, especially in overseas remittances. Furthermore, it has set a target price of Rs 215 for March 2026, valuing the stock at 1.2x one year forward price to book.
As per JPMorgan report, the bank’s key priorities include increasing its low-cost deposits (CASA), enhancing net interest margins (NIMs), and boosting fee income. It aims to grow its balance sheet at 1.5 times the nominal GDP while targeting a CASA ratio of 36% by FY28 from the current 30%. However, achieving this will be challenging due to intense competition for deposits and the need to reorient its branch strategy.
» Read More
