Federal Bank shares fall over 4% post Q4 results. Should you buy, sell, or hold?

Federal Bank shares declined 4.2% to Rs 188.2 in intraday trade on Friday despite the lender posting a 13.7% year-on-year (YoY) rise in net profit to Rs 1,030.2 crore for the March quarter of FY25, compared to Rs 906.3 crore a year ago.

Net interest income (NII) rose 8.3% YoY to Rs 2,377.4 crore. The net interest margin (NIM) improved to 3.12%, supported by strategic initiatives.

Asset quality showed improvement, with gross NPAs falling to Rs 4,375.5 crore from Rs 4,553.3 crore in the previous quarter and net NPAs declining to Rs 1,040.4 crore from Rs 1,131.2 crore.

In percentage terms, the gross NPA ratio eased to 1.84% from 1.95%, while the net NPA ratio improved to 0.44% from 0.49%. The provision coverage ratio, excluding technical write-offs, stood at 75.37%.

Should you buy, sell, or hold Federal Bank's stock? Here’s what brokerages say:

Investec

Investec has given a 'Buy' rating on Federal Bank with a revised target price of Rs 225, up from Rs 220.

It noted a soft topline but strong CASA and asset quality. NII remained weak due to lower average loans in Q4, partly from a conscious slowdown in Q3 for portfolio mix adjustment. PAT was 2% above expectations, supported by lower credit costs. The bank delivered a 16% YoY CASA growth, outpacing industry trends. However, Investec expects a 20 basis points YoY NIM compression in FY26.

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IIFL

IIFL retained its 'Buy' call but trimmed the target price to Rs 210 from Rs 218, citing mixed operational trends and muted loan growth due to a focus on profitability. While CASA growth and asset quality remain strong, the brokerage expects near-term pressure on return on assets (ROA), which could keep the stock range-bound.

Motilal Oswal

Motilal Oswal reiterated its 'Buy' rating with a target of Rs 230, highlighting the bank’s potential for sustained growth and improved profitability under new leadership. It now projects RoA and RoE to reach 1.25% and 14.0%, respectively, by FY27.

Nuvama

Nuvama reiterated its 'Buy' rating on Federal Bank, raising the target price to Rs 230 from Rs 215.

It attributed the PAT beat to low credit costs but noted a decline in NII due to a lower loan-to-deposit ratio (LDR) and higher cost of funds. The brokerage called Federal Bank the safest mid-sized bank with strong growth potential. While asset quality remains healthy and the management expects robust growth in FY26, NIM may face pressure from potential repo rate cuts.

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Nomura

Nomura maintained a 'Buy' call, though it lowered the target price to Rs 220 from Rs 225.

It flagged a soft NIM outlook in the near term and cut FY26–27 EPS estimates by 8–10% due to weaker NIMs and slower loan growth. Operating profit is also likely to be impacted by higher costs. Still, Nomura said asset quality is stable with healthy deposit growth.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)