Axis Securities retains 'Buy' on Federal Bank, eyes 10% upside: Here's why

Federal Bank share price today: Brokerage firm Axis Securities has recommended a 'Buy' rating on The Federal Bank, a private-sector lender, citing an upward trajectory in net interest margins (NIM) driven by the bank’s focus on mid-yield segments, stable asset quality, and signs of revival in growth momentum. According to analysts, the bank’s Q3 performance reflects a pick-up after a muted H1, and the growth outlook remains encouraging.  

The Federal Bank’s return on assets (RoA) is expected to improve to 1.3-1.4 per cent over FY27–28E from 1.1 per cent in FY26E, supported by healthy risk-adjusted credit growth, margin improvement from a shift to better-yielding segments, a strong deposit franchise with rising CASA mix, a strengthened fee income profile, and stable asset quality keeping credit costs under control. The brokerage noted that the stock is trading at 1.5x Sep’27E book value. 

 

Axis Securities has set a target price of ₹290 per share, implying a potential upside of 10 per cent from Friday, March 13, closing price of ₹263 on the NSE. Around 01:30 PM, shares of Federal Bank were trading at ₹258, down 1.88 per cent. In comparison, the benchmark NSE Nifty 50 was quoting at 23,102 levels, down by 49 points or 0.21 per cent. The company has a total market capitalisation of ₹63,614 crore.   READ | ICICI Bank erodes ₹1.2 trn mcap; stock hits 52-week low, down 12% in month

Here's why Axis Securities is upbeat on Federal Bank

NIMs on upward trajectory

Analysts said Federal Bank continues to prioritise NIM improvement, supported by growth in selected mid-yielding segments and a realignment of the liability mix with a focus on CASA (Current Account Savings Account) deposits, especially current accounts. The near-term impact on NIMs is expected to be limited, as about two-thirds of the December 2025 rate cut has yet to reflect in lending yields, and the bank aims to maintain margins at Q3 levels, the brokerage noted.

Overall asset quality remains stable

According to Axis, growth in the mid-yielding portfolio may lead to slightly higher credit costs compared with lower-yielding segments, but this is offset by better yields. The bank has guided that credit costs are expected to remain contained between 55–60 bps in FY26.  READ | Fino Payments Bank shares hits record low; stock plunges nearly 20%

Growth outlook remains robust

Federal Bank continues to see strong traction in its focus segments and expects to maintain growth momentum as it exits FY26. With capital infusion from Blackstone, the bank aims to achieve steady-state growth of 1.2–1.5x nominal GDP and target around 16 per cent growth in FY27E, the brokerage added.  Disclaimer: Views and outlook shared belong to the brokerage/analysts and are not endorsed by Business Standard. Readers' discretion is advised.