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Motilal Oswal Retains Buy Call on Federal Bank with Rs250 Price Target

Mr. Manian’s rebalance toward higher-yielding segments aims to improve profitability despite near-term margin pressure.

Federal Bank
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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.