Federal Bank share prices ended down nearly 2% on February 25. The stock is down nearly 7% in 1 month and 11% so far in 2025. However, leading brokerages remain optimistic about the bank’s long-term potential, maintaining a “Buy” rating. According to them, the bank’s strategic roadmap, which focuses on expanding its reach, improving profitability, and strengthening its position among India’s top private banks remains a key factor.
Here’s a closer look at the key factors driving this positive outlook.
Motilal Oswal on Federal Bank: Growth, profitability, and digital expansion
Federal Bank is gearing up for a major transformation under the leadership of its new MD & CEO, KVS Manian, as per the latest development of the lender. The brokerage firm Motilal Oswal has maintained a “BUY” rating with a target price of Rs 225, based on 1.4x its estimated book value for September 2026.
According to the brokerage firm, the bank is focusing on a balanced strategy of scaling operations while improving profitability. “With a 93-year legacy and strong roots in Kerala, Federal Bank is now aiming for sustainable growth through better-yielding loans, a stronger deposit base, and enhanced digital capabilities,” the brokerage added in its report.
The brokerage expects the bank to achieve an earnings CAGR of 19% over FY25-27, with a Return on Assets (RoA) of 1.3% and Return on Equity (RoE) of 14.6% by FY27. Furthermore, it noted in its report that the key focus area is expanding its high-yielding loan portfolio while maintaining stable asset quality.
JPMorgan on Federal Bank: Aiming for higher returns, but challenges remain
The brokerage firm JPMorgan remains “Overweight” on the stock, citing its strong liability franchise and stable deposit base, especially in overseas remittances. Furthermore, it has set a target price of Rs 215 for March 2026, valuing the stock at 1.2x one year forward price to book.
As per JPMorgan report, the bank’s key priorities include increasing its low-cost deposits (CASA), enhancing net interest margins (NIMs), and boosting fee income. It aims to grow its balance sheet at 1.5 times the nominal GDP while targeting a CASA ratio of 36% by FY28 from the current 30%. However, achieving this will be challenging due to intense competition for deposits and the need to reorient its branch strategy.
According to the brokerage, Federal Bank plans to improve risk-adjusted NIMs by increasing the share of high-yielding assets to 42% of its loan book by FY28, up from 36% currently.
Furthermore, the brokerage in its report added that the expansion of new initiatives could lead to higher operating costs.
Nomura on Federal Bank: Growth strategy, expanding beyond Kerala
The brokerage firm Nomura has maintained a “BUY” rating on Federal Bank with a target price of Rs 225. According to the brokerage, the bank’s “Project Breakthrough” focuses on improving profitability through better net interest margin, expanding its product range, and enhancing its fee income.
A key priority is increasing its CASA ratio to 36% by FY2028, with a particular focus on current account (CA) growth driven by SME and institutional customers.
As per the brokerage, the bank plans to open 400-450 new branches in high-growth states and Tier-2 cities. In addition to it, it is focusing on branch transformation through centralisation, digitisation, and automation to improve efficiency and cut operational costs. By leveraging technology, the bank aims to free up branch staff for customer centric activities, strengthening its business.
Kotak Institutional Equities on Federal Bank: See potential for earnings upgrade
Brokerage house Kotak Institutional Equities maintained a “BUY” rating on the stock with a fair value of Rs 225, citing the bank’s structured approach and potential for earnings upgrades.
Furthermore, the brokerage in its report noted, “We are not revising our estimates to factor in the possible outcomes of RoA/RoE improvement, as we are yet to see definite signs. We are building 1.1% RoA for FY2027E, while management is looking at >1.5% (frontline private banks).”
According to Kotak Institutional Equities, the bank’s strategy revolves around expanding its net interest margins (NIMs), increasing fee income, and optimizing its liability mix. Moreover, the management is also focused on broadening its product portfolio, strengthening its digital and compliance framework, and refining branch operations to drive profitability.
Citi on Federal Bank: Concentrates state specific expansion beyond Kerala
The brokerage house Citi has maintained a “BUY” rating with a target price of Rs 242, citing the bank’s enhanced profitability, instilling P&L culture in business heads and expansion beyond Kerala.
As per the report some of the key factors to monitor include strategy execution amidst competitive intensity, and the near term headwinds may outweigh medium term aspiration.