Federal Bank Ltd. share price target

After the course correction in 3Q, Federal Bank hosted an analyst meet to unveil its long-term (next 3-5 years) business strategy (Plan 4.0) under the aegis of new MD & CEO KVS Manian (ex-Kotak), per which it plans to strengthen its core and tweak its asset/liability profile toward delivering sustained RoA of over 1.4% from 1.2% now.

We maintain our BUY recommendation on the stock

Under new MD Manian (ex-Kotak), Federal has adopted a risk calibrated growth strategy from 3Q itself (down to 16% YoY from a high of 19-20%), and made accelerated provisions (Rs2.9bn) leading to a 10% miss on PAT at Rs9.6bn (1% RoA).

Federal Bank (FB) reported 3QFY25 earnings of INR9.5b (7% miss), amid accelerated provisions, while PPoP stood broadly in line.

Q3FY25 numbers were a mixed bag. With a change in management, the reorientation undertaken is not surprising however we acknowledge that it will take few quarters to understand its full implication as execution happens on ground.

Quarterly Update Q2FY25

We maintain our BUY recommendation on the stock.