Federal Bank shares jump as lender eyes deposit-driven growth - what else is driving shares

Federal Bank shares were in demand during Wednesday’s trading session on the exchanges. The stock quoted a day’s high level of Rs 133.05 per share, up around 3 per cent from Tuesday’s closing of Rs 129.1 per share on the BSE today.

At around 01:05 PM, the scrip was up around 3 per cent to Rs 132.95 per share versus a 0.61 per cent rise in the Sensex.

The stock witnessed a buying sentiment on positive management commentary at the Analyst Day meet on Tuesday. The management said “Deposits have grown faster than Advances providing significant headroom for future growth.”

Federal Bank Q3 Results: Profit, NII jump to record highs as asset quality improves

“The positive outlook reflects the consistent strengthening of bank’s credit profile as reflected in its progressing liability franchise, improving diversification of its loan portfolio, reasonably well-managed asset quality and stable credit costs,” India Ratings in its comment on Federal Bank.

Most global brokerages are upbeat on the bank after positive commentary by management and see up to 36 per cent upside potential in the stock. Morgan Stanley maintains an ‘overweight’ rating, while UBS has a ‘neutral’ call and CITI retained a ‘buy’ stance on the bank.

Morgan Stanley said that improving the loan mix towards higher-margin assets will be the key focus over the next 3 years for Federal Bank. While UBS said that the management is optimistic about key business drivers as well as reaffirmed net interest margin (NIM) and return on asset (ROA) guidance.

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