Brokerage firm Axis Securities has retained a ‘Buy’ rating on Federal Bank, citing improving net interest margins (NIM), stable asset quality, and signs of revival in growth momentum. The brokerage has set a target price of ₹290 per share, indicating a potential upside of about 10 per cent from the stock’s closing price of ₹263 on March 13.
Analysts noted that the bank’s Q3 performance showed a recovery after a relatively muted first half of the financial year. The outlook for growth remains encouraging as the bank continues to focus on mid-yield lending segments and improving its deposit mix.
Axis Securities expects Federal Bank’s return on assets (RoA) to improve to 1.3–1.4 percent by FY27–28 from around 1.1 percent estimated for FY26. The improvement is likely to be supported by healthy credit growth, better margins driven by higher-yielding loan segments, rising CASA deposits, and a stronger fee income profile.
The brokerage also highlighted that the bank’s asset quality remains stable, which is expected to keep credit costs under control. Federal Bank has guided that credit costs will likely remain in the range of 55–60 basis points for FY26.
According to analysts, the bank is actively working to strengthen its liability mix by increasing its focus on current and savings accounts. This strategy is expected to support margin expansion over the medium term. While growth in mid-yield loan segments could result in slightly higher credit costs compared with lower-yield portfolios, the higher yields are expected to offset the impact.
Axis Securities further noted that a large part of the impact of the December 2025 rate cut is yet to reflect in lending yields. As a result, the near-term impact on margins is expected to remain limited, and the bank aims to maintain NIM levels close to those recorded in the third quarter.
With capital infusion from Blackstone, Federal Bank is targeting steady long-term growth. The brokerage expects the lender to achieve credit growth of around 16 percent in FY27, supported by strong traction in its key business segments and a stable operating environment.
Federal Bank shares may rise 10% as margins and growth outlook improve
