Citi has reiterated its Buy rating on Federal Bank, setting a target price of ₹231, which indicates a potential upside of 23% from the current market price of ₹187.50. The bank reported a return on assets (RoA) of 1.28%, beating Citi estimates, supported by a low credit cost of 30 basis points, steady net interest margins (NIMs), and strong fee income growth.
Key positives highlighted by Citi include the bank’s secured lending focus, which has limited slippages and kept credit costs below 80 basis points. The liquidity coverage ratio (LCR) improved to 115% despite modest deposit growth of 1% quarter-over-quarter. Citi also noted growth in core NIMs, with a 2 basis point quarter-over-quarter increase, driven by a rising share of high-yielding advances. Additionally, loan processing and para-banking fees showed notable traction.
For FY25-27E, Citi projects RoA in the range of 1.2-1.3% and return on equity (RoE) at 13-14%, with an estimated credit growth of 15-17%.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Investors are advised to perform their due diligence before making investment decisions.
