Federal Bank shares delivered similar returns in two and three years; what's next?

Shares of Federal Bank Ltd have delivered similar returns during two and three years. The stock of the Kerela-based lender rose 78.73% and 79.04% during both periods. This signals shareholders, who invested two years ago are in a more comfortable position due to a shorter holding period compared to three years.

On Thursday, Federal Bank shares closed 0.57% lower at Rs 156.30 against the previous close of Rs 157.20 on BSE. The stock hit a record high of Rs 166.65 on February 19 this year. Market cap of the bank on Thursday stood at Rs 38,041 crore. The banking stock has a one-year beta of 0.7, indicating low volatility during the period.

Total 7.63 lakh shares changed hands amounting to turnover of Rs 12.01 crore on BSE.

Axis Securities is bullish on the stock with a target of Rs 180.

“The lender’s key strengths continue to be i) Sustained credit growth, ii) Strong liability franchise, iii) Improving fee income, iv) Gradually improving Cost Ratios and v) Stable credit costs backed by healthy asset quality metrics. The bank is working closely with the recruitment agency to identify the successor for the current CEO Mr. Shyam Srinivasan who is slated to retire in Sep’24. We maintain our BUY rating on the stock with a target price of Rs 180/share (1.3x Sep’25E ABV),” said the brokerage.

However, loan growth moderation and asset quality challenges in the higher-yielding segment are key risks for the outlook of the banking stock.

In terms of technicals, the relative strength index (RSI) of the stock stands at 57.5, signaling the stock is neither oversold nor overbought. Federal Bank shares are trading higher than the 5 day, 20 day, 50 day, 100 day and 200 day moving averages.

Emkay Global has a target of Rs 180 on the stock.

The brokerage cited bank’s healthy RoA/RoE trajectory, reasonable valuations (1x FY26E ABV), and lower exposure to unsecured retail loans behind its bullish stance.

Nomura has a price target of Rs 190. The global brokerage expects the lender to deliver a 22% Compounded Annual Growth Rate (CAGR) in its Pre-Provisioning Operating Profit over financial year 2024 - 2026.

It valued Federal Bank at 1.2 times December-2025 Price-to-book-value, with its subsidiaries contributing 8 per share.