Amidst today’s significant market drop, Federal Bank shares reached a record high. In contrast to the previous closing of Rs 204.25 on the BSE, Federal Bank shares reached a record high of Rs 207.50 on Monday. At Rs 204.15, it subsequently closed on a flat note. On January 23, 2024, the stock dropped to a 52-week low of Rs 139.45. At the end of the September 2024 quarter, Rekha Rakesh Jhunjhunwala, the late investor Rakesh Jhunjhunwala’s widow, owned 3.45 crore shares, or 1.42% of the private lender.
On Monday, the bank’s market value was Rs 50,051 crore. With a one-year beta of 1, the banking stock shows average volatility over that time frame. On the BSE, 9.99 lakh shares of the bank were exchanged, generating a transaction of Rs 20.48 crore. Technically speaking, the stock’s relative strength index (RSI) is 64.6, indicating that it is not trading in either the oversold or oversold zone. The five-, twenty-, fifty-, one hundred-, and two-day moving averages are all below the current price of Federal Bank shares. Following Q2 results, Nuvama has set a price objective of Rs 235.
At 0.9% of lagging loans, slippage was constant every quarter. While slippage in BUB remained steady, slippage in COB dropped precipitously, while agri-slippage increased by 24% QoQ. The credit fee was just 28 bp. While the GNPL ratio decreased slightly to 2.09%, GNPL increased 3% every quarter. PCR increased from 72% QoQ to 73%. Despite their greater rejection rate, management is optimistic about preserving strong asset quality in MFI.
The bank uses the BC model for MFI. Co-lending is a tiny percentage of MFI and has only recently begun. We continue to recommend “BUY” because of the solid asset quality and robust profit growth. The management has faith that it can generate sufficient liabilities to finance expansion. The quality of MFI assets is probably going to stay strong. According to the broking, the company is now selling at 1.1x BV FY26E. The target price of Axis Securities’ buy call on the banking stock is between Rs 214 and Rs 222. At Rs 190, the stop loss can be set.
On the weekly chart, the Federal Bank is moving inside a medium-term rising channel. It has recently found support near the lower band of the channel and is currently moving towards the upper band. Within its rising channel, it has broken above a little descending triangle formation around the Rs 197 level, suggesting that the medium-term uptrend will continue. Indicating a surge of market players joining at that point, volume activity jumped dramatically during the breakout after declining during the pattern construction. The broker stated that a buy signal was generated when the weekly RSI strength indicator passed over the reference line.
The stock gets a buy call from Centrum Broking with a target price of Rs 250. Investors have established three distinct goals since the management change: 1) raising NIMs, 2) cutting open, and 3) raising the total return profile. By the next quarter, the new leadership has promised to lay out its strategic plan for tackling these issues. We have a very favourable outlook on these developments. To reach our updated target price of Rs 250, we also roll over to 1HFY27E and keep assigning 1.5x P/B. Centrum Broking stated, “Maintain BUY with a 35% upside from current levels.”
The price objective of Dolat Capital’s accumulated call on Federal Bank is Rs 215. “There was consistent fresh NPA accumulation across segments. Better-than-expected developments in secured books mitigated the impact of a small increase in MFI/PL delinquencies. According to the bank, slippage should stay within the present range unless there is a small increase. Although trends in asset quality were better than expected, it is still important to keep an eye on the seasoning of higher-yielding, more recent portfolios. The broking stated, “We adjust earnings and maintain the ‘Accumulate’ rating with an unaltered price target of Rs 215 and value the bank at 1.4x Sep-26E P/ABV versus RoA/RoE of 1.3%/15%.”
In Q2, the bank’s net profit increased by 10.8% to Rs 1056.7 from Rs 954 crore in the same quarter the previous year. Compared to the same quarter last year, when total income was Rs 6,186 crore, it increased to Rs 7,541 crore in Q2. During the quarter, the bank reported interest income of Rs 6,577 crore, which was more than Rs 5,455 crore during the same time last year.
