Global brokerage Nomura has significantly upgraded Federal Bank shares, shifting its recommendation from 'Neutral' to 'Buy' and raising the price target by a substantial 53%. The new target stands at Rs 330, up from the previous Rs 215, reflecting confidence in the private sector lender's performance.
Strong Q4 Performance Fuels Nomura's Upgrade
Nomura's decision comes on the heels of Federal Bank's impressive fourth-quarter (Q4 FY26) earnings. The brokerage highlighted the bank's consistent execution and strong asset quality, which it noted as superior to its mid-tier peers. Key factors contributing to the upgrade include:
- Robust Core Profitability: Federal Bank surpassed estimates on core Pre-provision Operating Profit (PPOP), driven by higher fee income and controlled operating costs.
- Enhanced EPS Estimates: Nomura raised its Earnings Per Share (EPS) estimates by 9% for FY27 and 13% for FY28, projecting a 17% EPS Compound Annual Growth Rate (CAGR) over FY26-28F. The brokerage also forecasts Return on Assets (ROA) at 1.3% and Return on Equity (ROE) at 12% by FY28.
- Healthy Loan Growth: The bank reported healthy loan growth across its focus segments, maintaining stable asset quality.
Federal Bank's Financial Highlights for Q4 FY26
The Kochi-based lender demonstrated strong financial metrics for the March 2026 quarter:
- Net Profit: Consolidated net profit rose 22% year-over-year to Rs 1,259.1 crore, compared to Rs 1,030.2 crore in the prior corresponding period.
- Net Interest Income (NII): NII saw a remarkable 56% increase, reaching Rs 3,173 crore for the quarter, up from Rs 2,377 crore previously.
- Asset Quality Improvement: The bank significantly improved its asset quality. The net non-performing asset (NPA) ratio fell to 0.2% in Q4 FY26 from 0.42% in Q3 FY26. Adjusted for one-off items, the ratio stood at 0.37%. The gross NPA ratio also improved to 1.62% from 1.84% in Q4 FY25.
KVS Manian, Managing Director & CEO of Federal Bank, commented, "We have made significant progress in restructuring our liabilities by focusing on retail mobilisation and reducing reliance on high-value deposits, which is reflected in our optimised cost of funds."
Other Brokerage Views and Market Performance
Brokerage Anand Rathi also maintains a bullish stance on Federal Bank, setting a price target of Rs 349. Anand Rathi cited strong credit growth, an improving CASA (Current Account Savings Account) ratio, and the lender's healthy asset quality as reasons for its optimism. Credit growth reached 12.7% year-over-year in Q4 FY26, spearheaded by high-yielding segments such as gold loans (up 26%) and commercial vehicles (up 25%).
In the current trading session, Federal Bank shares were up 0.51% at Rs 288.45, against a previous close of Rs 287. The bank's market capitalization stood at Rs 71,029 crore.