Several banking and financial sector stocks are seeing significant selling pressure. However, Motilal Oswal has put out detailed company-specific analysis on a clutch of financial stocks, and four names stand out with a ‘Buy’ rating backed by robust earnings and valuation targets.
From gold loan companies riding a commodity price tailwind to mid-market banking franchises quietly improving their asset quality, here is what Motilal Oswal’s research team had to say.
Motilal Oswal on Federal Bank: ‘Buy’
Motilal Oswal has a target price of Rs 325 on Federal Bank, implying an upside of 14%.
Federal Bank reported fourth quarter FY26 profit after tax of Rs 1,260 crore, up 22% year-on-year, beating estimates by 16%. Q4 net interest income grew 33% year-on-year to Rs 3,170 crore, while the net interest margin improved to 3.2% from 3.12% a year ago.
Advances grew 12.7% year-on-year, driven by gold loans and commercial vehicles, while the current account savings account ratio improved to 32.9% from 32.1% in the second quarter of FY26. The gross non-performing asset ratio declined 10 basis points quarter-on-quarter to 1.62%.
“The bank has deliberately reduced wholesale deposits due to higher costs, which should be viewed as a strength rather than a weakness,” according to Motilal Oswal’s fourth quarter FY26 results update on Federal Bank.
Motilal Oswal on Indian Bank: ‘Buy’
Motilal Oswal has a target price of Rs 1,025 on Indian Bank, implying an upside of 17%. The stock has been rated as Buy.
Indian Bank reported fourth quarter FY26 profit after tax of Rs 3,100 crore, up 5% year-on-year, missing estimates by approximately 5% owing to an additional provision of Rs 310 crore on account of the West Asia crisis.
Q4 The Net interest income grew 11% year-on-year to Rs 7,110 crore, while advances grew 14.7% year-on-year led by retail and micro, small and medium enterprise loans. The gross non-performing asset ratio improved 25 basis points quarter-on-quarter to 1.98%, with the provision coverage ratio holding steady at 92.7%.
Indian Bank guided for deposit growth of 9% to 11% and advances growth of 11% to 13% in FY27, with a continued focus on mid-corporate lending where pricing power and yields were relatively better.
“The bank continues to maintain a best-in-class provision coverage ratio, providing comfort on incremental credit costs,” according to Motilal Oswal’s fourth quarter FY26 results update on Indian Bank.
Motilal Oswal on IIFL Finance: ‘Buy’
Motilal Oswal has a target price of Rs 600 on IIFL Finance, implying an upside of 34%.
IIFL Finance delivered a strong fourth quarter FY26, with net interest income growing 31% year-on-year to approximately Rs 1,720 crore and profit after tax post minority corporate interest coming in at Rs 590 crore, approximately 10% ahead of estimates.
For full FY26, the gross stage 3 assets declined approximately 15 basis points quarter-on-quarter to approximately 1.45%, while annualised credit costs fell to approximately 1.9% from approximately 2.6% in the previous quarter.
The company expected gold loan growth of 20% to 25%, contingent on gold prices sustaining at current levels, with the housing business also at an inflection point.
“The company expects credit costs to meaningfully decline in FY27 and has guided for credit costs of 1.5% to 1.7%,” according to Motilal Oswal’s company update on IIFL Finance.
Motilal Oswal on Five Star Business Finance: ‘Buy’
Motilal Oswal has a target price of Rs 600 on Five-Star Business Finance, implying an upside of 20%.
Five Star Business Finance reported a subdued fourth quarter FY26, with profit after tax declining 4% year-on-year to Rs 270 crore. Net interest income grew approximately 10% year-on-year to Rs 610 crore, while assets under management grew 11% year-on-year to approximately Rs 13,200 crore.
Gross stage 3 rose to 3.4% from 1.79% a year ago, though early delinquency indicators showed improvement, with the 1-plus days-past-due metric improving approximately 90 basis points quarter-on-quarter to 17.3% and the 30-plus days-past-due metric declining approximately 12 basis points quarter-on-quarter to 12.7%.
The company guided for approximately 20% assets under management growth in FY27, with growth expected to be largely driven by southern markets including Andhra Pradesh, Telangana, Tamil Nadu, and Karnataka.
“The uptick in current bucket customers after several quarters of decline reflects normalisation in collection cycles and borrower behaviour,” according to Motilal Oswal’s fourth quarter FY26 results update on Five Star Business Finance.
Conclusion
Across these four names, the theme was one of gradual recovery and stabilisation rather than blowout growth. Federal Bank and Indian Bank saw asset quality improve steadily, while IIFL Finance and Five Star Business Finance turned a corner after a rough patch in their respective lending portfolios.
Disclaimer: The stock ratings and price targets mentioned above represent the analysis of Motilal Oswal Financial Services and do not constitute an offer or solicitation by this publication. Investing in equities involves substantial risk; readers should consult with a SEBI-registered investment advisor before making any financial decisions based on these projections. Past performance and brokerage estimates are not guaranteed indicators of future results.
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