Federal Bank share price falls 4% after Q4 results 2025. Buy or sell on rise?
Federal Bank share price declined over 4% on Friday after the private sector lender announced its Q4 results. Federal Bank shares fell as much as 4.32% to ₹ 188.10 apiece on the BSE.
Federal Bank reported a net profit growth of 13.7% at ₹ 1,030.2 crore in the fourth quarter of FY25, compared to ₹ 906.3 crore in the year-ago quarter.
The bank's net interest income (NII) in Q4FY25 increased 8.3% year-on-year (YoY) to ₹ 2,377.4 crore, while net interest margin (NIM) improved to 3.12%.
Asset quality improved sequentially during the March 2025 quarter, and as slippages were at ~90 bps. Loan growth was at 2% QoQ and 12% YoY, but mid-yield loans grew faster at 19% YoY. Deposit growth accelerated to 7% QoQ and 12% YoY.
Federal Bank's Q4FY25 PAT beat consensus by 6% due to lower credit cost and higher two recovery, but NII, down 2% QoQ, missed consensus by 4%. The decline in NII was driven by a lower LDR and a small uptick in CoF. Opex increased sharply, up 8% QoQ, owing to a large portion of branch expansion for the year happening in Q4, Nuvama Institutional Equities said in a note.
According to the brokerage firm, Federal Bank is the safest mid-sized bank with potential to deliver strong growth. The bank has already started delivering on its defined strategy with CA acquisition up 50% over H1FY25, an uptick in self-funding and 19% YoY growth in mid-yield loans.
Nuvama Equities maintained a 'Buy' rating and raised Federal Bank share price target to ₹ 230 apiece from ₹ 215 earlier.
Kotak Institutional Equities maintained a 'Buy' call on Federal Bank shares with an unchanged target price of ₹ 225 per share, valuing the bank at ~1.4X book and 12X March FY2027 EPS for RoEs at 13%.
'Our assumptions do not build the NIM RoA expansion within the timelines that management is looking to aspire to. This implies that earnings have an adequate margin of comfort. A re-rating of Federal Bank is still some time away, as we need to have greater confidence in the path of RoA improvement. Near-term triggers are not many, as focus areas are driven largely by NIM expansion,' said the brokerage firm.
According to Kotak Equities, valuations of Federal Bank shares are not too demanding either, and hence, the downside to any disappointment in any quarter is likely to be fairly negligible.
At 12:45 PM, Federal Bank shares were trading 3.89% lower at ₹ 188.95 apiece on the BSE.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
First Published: 2 May 2025, 12:47 PM IST
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