Federal Bank shares fall over 4% amid brokerages' revised outlook
Published on 02/05/2025 12:49 PM
Federal Bank shares fall over 4% amid brokerages' revised outlookWhile Federal Bank continues to maintain a decent growth profile, brokerages are cautious about its margin sustainability and operating leverage in a changing rate environment.By CNBCTV18.com May 2, 2025, 12:49:53 PM IST (Published)2 Min ReadShares of Federal Bank declined over 4% following its March quarter earnings, which triggered revised outlooks from key brokerages amid a challenging operating environment.
While Federal Bank continues to maintain a decent growth profile, brokerages are cautious about its margin sustainability and operating leverage in a changing rate environment.
Nomura has maintained its 'Buy' rating on Federal Bank but lowered its target price to ₹220 per share from ₹225.
The brokerage described the latest quarter as mixed, citing a softer near-term outlook for Net Interest Margins (NIM).
It said that the bank's operating profit was adversely impacted due to a combination of lower NIMs and higher operating expenses.
Additionally, Nomura has revised its loan growth (CAGR) assumptions for FY 25-27 to 15%, down from 17.5% earlier. It also expects NIM moderation of 17 basis points and 9 basis points in FY26 and FY27, respectively, bringing them to 2.9% and 3.1%.
Consequently, EPS estimates for FY26-27 have been reduced by 8-10%.
In contrast, Morgan Stanley has reiterated its 'Underweight' stance on the stock with a target price of ₹160 per share.
It anticipates that Pre-Provision Operating Profit (PPoP) will remain under pressure as the interest rate cycle turns and operating expenses continue to rise.
According to Morgan Stanley, sustaining FY25 return ratios—Return on Assets (RoA) of 1.2% and Return on Equity (RoE) of 13%—will be challenging.
The brokerage has also revised its earnings estimates downward by 4% for FY26 and 2% for FY27. It emphasized the near-term challenges facing Federal Bank, including heightened competitive intensity that could weigh on profitability.Continue Reading(Edited by : Anshul)Check out our in-depth Market Coverage, Business News & get real-time Stock Market Updates on CNBC-TV18. Also, Watch our channels CNBC-TV18, CNBC Awaaz and CNBC Bajar Live on-the-go!TagsearningsFederal Bank