Overview

• Motilal Oswal sustains its Buy rating on Federal Bank with a Rs250 per share target, reflecting approximately 18% upside potential.
• New CEO Mr. Manian’s strategy has shifted the bank’s portfolio toward higher-yielding loans such as loan-against-property, used commercial vehicles, gold loans and credit cards.
• The bank has exited select non-remunerative corporate loans and pursued liability optimization and digital initiatives to enhance operational efficiency.
• Net interest margins are forecast to remain under near-term pressure from rising funding costs and muted CASA growth, but are projected to improve to about 3.45% by FY28.
• Analysts expect return on assets to rise to 1.4% and return on equity to reach 15.6% by FY28 as cost/income ratio falls toward 48.8% and recent RBI relaxations support a rebound in gold loan growth.