South Indian, AU SFB, Federal, DCB Bank rally up to 13%; here's why

South Indian Bank, Federal Bank, AU SFB and RBL Bank hit their respective 52-week highs on the BSE in intra-day trade on Monday on the back of strong earnings and RBL Bank deal.

Shares price movement of small, mid-sized private sector banks

 

Shares of private sector banks rallied up to 13 per cent on the BSE in Monday’s intra-day trade amid heavy volumes after the banks reported a healthy earnings for the quarter ended September 2025 (Q2FY26).

 

Meanwhile, RBL Bank will see a major ownership change as Emirates NBD plans to acquire a controlling 60 per cent stake through a $3 billion primary infusion, marking the largest foreign direct investment (FDI) deal in India's banking sector.

 

Among individual banks, DCB Bank has surged 13 per cent to ₹146, South Indian Bank soared 11 per cent to ₹36.25, followed by AU Small Finance Bank (SFB) (8 per cent at ₹856.70), Federal Bank (5 per cent at ₹223.75) and RBL Bank (5 per cent at ₹314.65).

 

South Indian Bank, Federal Bank, AU SFB and RBL Bank hit their respective 52-week highs on the BSE in intra-day trade.

 

What’s driving private sector banks?

 

Emirates will invest $3 billion to acquire a 60 per cent stake in RBL Bank through a preferential issue at ₹280 per share, triggering an open offer for an additional 26 per cent stake, potentially increasing its holding to 74 per cent after the transaction, subject to regulatory and shareholder approvals. This strategic investment will enhance capital and strengthen ties between India and the UAE, and increase RBL Bank's net worth to ₹42,000 crore-44,500 crore.

 

According to Motilal Oswal Financial Services (MOFSL), this capital infusion will help RBL Bank scale its existing business and expand into non-resident, trade, and cross-border corporate banking, leveraging Emirates’ global presence and technology integration. With a 50 per cent board representation but no management control for Emirates NBD, the deal aims to accelerate RBL BanK’s growth through organic and inorganic opportunities while maintaining core operations and enhancing shareholder value, the brokerage firm said. It reiterates BUY rating on RBL Bank with a target price of ₹350 per share.

 

Meanwhile, DCB Bank reported a steady quarter with a beat in earnings amid lower provisions, healthy net interest income (NII), and controlled opex. Margin improved 3bp QoQ, and the bank expects it to improve further going forward if no further rate cut occurs. Business growth was healthy with increased focus on gold loans and co-lending. Asset quality improved with slippages moderating sequentially, and management expects credit cost to remain below 45bp for the full year. MOFSL reiterates BUY rating on DCB Bank with a target price of ₹165 per share (based on 0.8x FY27E ABV).

 

Federal Bank delivered a healthy revival in Q2FY26, on the back of margin recovery, healthy fees income, and steady credit cost. Net interest margin (NIM) expanded 12 bps sequentially to 3.06 per cent aided by lower funding costs and a better loan mix towards mid-yield segments. Credit cost moderated to ~50 bps, in line with guidance, as MFI-led stress continued to ease. GNPA improved by 8 bps sequentially to 1.83 per cent. Profit after tax (PAT) stood at ₹955 crore, down 9.6 per cent YoY (up 11 per cent QoQ).

 

Management continues to execute well on its strategy of improving yields, liability mix, and fee diversification, with visible progress in Q2FY26 through margin recovery, healthy CASA growth, and steady asset quality. Margin pressure and slower growth in 1HFY26 is seen to impact FY26 performance, however, anticipating recovery in H2FY26, ICICI Securities said in a note.

 

As regards to South Indian Bank, ICICI Securities expect advances to grow at ~11–12 per cent compound annual growth rate (CAGR) over FY26–27E, broadly in-line with industry and factoring RoA of ~0.9 per cent FY27E. With management steadily executing its plan to realign the loan mix toward retail & MSME segment and maintaining resilient asset quality, the bank is well positioned for a gradual recovery in margins and profitability.  The brokerage firm maintains a ‘buy’ rating on South Indian Bank with a target price at ₹38, keeping multiple at ~0.9x FY27ABV.