Federal Bank shares rise as lenders eye deposit-driven growth — what else is driving shares?

Bundesbank shares were in demand on the stock exchanges during the trading day on Wednesday. The stock traded at a daily high of Rs 133.05 per share, up around 3 percent from today’s close of Rs 129.1 per share on Tuesday.

At around 1.05pm the Scrip was up about 3 per cent at Rs 132.95 per share versus a 0.61 per cent rise in the Sensex.

The stock experienced a buy sentiment on positive management comments at Tuesday’s Analyst Day meeting. Management said, “Deposits have grown faster than advances, providing significant scope for future growth.”

The bank’s management is aiming to grow its loan book in the high teens, powered by digital and fintech partnerships, and remains focused on growing its high-margin products through the use of data analytics.

Also, a rating agency India Ratings has assessed the Federal Bank’s additional limits for Basel III Tier 2 bonds and affirmed existing bonds at “IND AA” with a positive outlook, the private lender said in a separate press release dated February 28, 2023.

Also Read: Federal Bank Q3 Results: Profit, NII Jump to Record Highs as Asset Quality Improves

“The positive outlook reflects the consistent strengthening of the bank’s credit profile, reflected in its ongoing guarantee business, improved diversification of its loan portfolio, reasonably well-managed asset quality and stable borrowing costs,” India Ratings said in its commentary on the Federal Bank.

Most global brokerage houses are bullish on the bank after a positive comment from the management and up to 36 percent see upside potential in the share. Morgan Stanley maintains an “overweight” rating, while UBS maintains a “neutral” call and CITI maintains its “buy” position on the bank.

Morgan Stanley said improving the credit mix towards higher-margin assets will be the main focus for the Federal Bank over the next three years. While UBS said management was bullish on key business drivers, it confirmed guidance for net interest margin (NIM) and return on asset (ROA).

Even domestic brokerage firm Motilal Oswal has given the Federal Bank a buy rating of 170 rupees per share as it believes the lender is well positioned to deliver RoA expansion, led by controlled borrowing costs and a rise in mix made of highly compliant segments.

Bundesbank share price: historical development

The Federal Bank’s stock price has provided its investors with a decent return over the past year, as the stock is up about 38 percent over the period, compared to a nearly 7 percent rise in the S&B BSE Sensex.

The stock is up about 12 percent over the past six months versus a nearly 1 percent rise in the benchmark index over the same period.

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