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Domestic brokerage and research firm HDFC Securities believes that Federal Bank is one of the best placed mid-tier old private sector bank as it has strong granular liability franchise and comfortable capital positioning which can act as a cushion against any uncertain eventuality of asset quality shocks. 

“The bank has recently hired many senior level leaders across key verticals. Moreover, the extension of Shyam Srinivasan as the MD & CEO for further three years by RBI has removed the overhang and brought the management stability which many peers lack," the brokerage added in a note.

Federal bank has posted decent Q2FY22 results with strong operating performance and lower provisions due to lower loan loss writebacks. On the back of a granular wholesale portfolio and its secured retail franchise, it has reported an impressive asset quality.

The brokerage expects asset quality and NIM to improve gradually over FY21-24E. There could be higher recoveries in the next two-three years than slippages.

“We feel that investors can buy Federal bank at the LTP of Rs.101.1 and add on dips to 90.25 band. We expect the Base case fair value of Rs.111.5 and the Bull case fair value of 124 over the next 2 quarters," HDFC Securities suggested.

Another brokerage house Angel One (earlier Angel Broking) is also bullish on the bank stock as it believes that non-performing assets (NPAs) have remained steady for the bank over the past few years. The brokerage has a target price of 135 per share on Federal Bank's stock.

Ace investor Rakesh Jhunjhunwala holds 2.64% stake in Federal bank as of September 2021, whereas his wife Rekha Jhunjhunwala holds 1.01% stake in the bank, as per the BSE shareholding data.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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