Q3 results: Should you buy Federal Bank shares after Q3 earnings? Here’s what brokerages say

Federal Bank share price declined over 2% on Wednesday dragged by overall weak market sentiment, especially in bank stocks. Federal Bank shares fell as much as 2.60% to 145.80 apiece on the . registered a 25.3% growth in its net profit for the third quarter of FY24 at 1,006.74 crore as compared to 803.61 crore in the corresponding quarter of last year.

The bank’s net interest income (NII) in Q3FY24 increased 8.5% to 2,123.4 crore from 1,956.5 crore, YoY. Net interest margin (NIM) during the December quarter fell to 3.19% from 3.22% in September quarter. Most analysts remain bullish on Federal Bank shares after Q3 results. Here’s what brokerages have to say: Nuvama Institutional Equities Federal posted Q3FY24 NII in line, but a beat on PAT driven by higher trading gains from a stake sale in Fedbank Financial Services.

NIM edged down 3 bps QoQ to 3.19%, which is good given tight deposit taking in the system, Nuvama institutional Equities noted. Federal Bank stock is trading at 1.1x BV FY25E adjusted for FEDFINA. The brokerage believes it can trade up to 1.25x. It has built in moderation in RoA for FY25E/26E on normalizing credit cost and RBI’s nudge on LDR.

Given inexpensive valuation and a low risk, well balanced business model, Nuvama retained ‘Buy’ rating on the stock and raised the target price to 185 per share from 180 earlier, based on 1.3x one year forward earnings and 13 for FEDFINA. “Federal will announce a new CEO shortly (incumbent retires in Sep 24).

While the bank has been talking about succession planning, the CEO’s retirement is a near term overhang," said the brokerage. Antique Stock Broking Federal Bank’s NIM performance has been weaker than expected, however, as the cost of deposits peak in a couple of quarters and the lending mix gradually moves in favor of better yielding products, we expect NIM to be in a narrow range, said Antique Stock Broking.

Over the cycle, FB has maintained strong asset quality performance and has demonstrated its ability to gradually improve fee income contribution and its willingness to invest in technology and partnerships to build profitable businesses, which augurs well for the bank from a medium term perspective, it added.

The brokerage maintained a ‘Buy’ call with an unchanged target price of 190 per share. According to Motilal Oswal Financial Services, Federal Bank reported broadly in line performance, with healthy business growth and slight weakness in asset quality and margins. However, in line NII growth, controlled provisions, and higher treasury income drove the earnings beat.

The brokerage firm broadly maintained its estimates as controlled credit costs and healthy other income is expected to keep earnings robust. It estimates the bank to deliver RoA/RoE of 1.3%/14.5% in FY25. It reiterated a ‘Buy’ rating on the stock with a target price of 175 per share. Yes Securities Yes Securities maintained a ‘Buy’ rating on Federal Bank, which has been one of its top picks since June 2021, with an unchanged price target of 195.

It values the standalone bank at 1.3x FY25 P/BV for an FY24E, FY25E and FY26E RoE profile of 14.9%, 15.0% and 15.5%. At 11:10 am, Federal Bank shares were trading 1.80% lower at 147.00 apiece on the BSE. Livemint tops charts as the fastest growing news website in the world to know more. Unlock a world of Benefits! From insightful newsletters to real time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away!.