Federal Bank share price target raised by UBS to ₹310 anticipating better operating metrics

Shares of Federal Bank Ltd. are in focus on Monday, December 15, after brokerage firm UBS raised its price target on the stock by 24%.

UBS raised its price target on Federal Bank to ₹310 from ₹250 earlier. The revised price target implies an upside potential of 18.8% from Friday's closing levels. UBS maintained its "buy" rating on the stock.

The brokerage is of the view that an improvement in Federal Bank's operating trends is likely to accelerate in the medium term for the lender.

UBS expects Federal Bank's credit costs, which declined by 15 basis points in the second quarter, to remain stable, while near-term growth, margins could remain subdued due to the continued balance sheet rationalisation and the RBI's recent interest rate cut by 25 basis points.

Federal Bank shares trade at 1.5 times its estimated price-to-book value for financial year 2027, or 1.4 times including the capital raise, which is at par with peers such as IDFC First Bank. Although Federal Bank has a better return on equity (RoE) profile, the loan growth gap could narrow in the medium term, according to the UBS note.

As a result, the brokerage has raised its loan growth forecasts for financial year 2028-2029 by up to 100 basis points, NIMs by five basis points, as well as estimates for fee income and operational expenditure for the lender. Earnings Per Share (EPS) estimates for the same timeframe have also been raised by 5% and 9% respectively.

Of the 49 analysts that have coverage on Federal Bank, 35 have a "buy" rating, 13 have a "hold" rating and one has a "sell" rating.

Shares of Federal Bank ended the previous session flat at ₹261 apiece. The stock has gained 9.2% in the past month and 30.2% this year, so far.

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