Jhunjhunwala-family-owned lender stock falls over 2% as weak margins in Q3 weighed

Jhunjhunwala-family-owned stock, Federal Bank, traded in the red in early trade on Wednesday, January 17, after the lender posted its December quarter (Q3 FY24) results on Tuesday. At around 10:15 am, the stock traded lower by over 1 per cent at Rs 147.7, while at the day’s low, it hit a price of Rs 145.8, down 2.61 per cent.

The lender posted a 25 per cent increase in profit for Q3, which came in at Rs 1,007 crore as against Rs 804 crore in the same period last year.

What do brokerages make of the stock?

Global brokerage JP Morgan has retained its ‘overweight’ rating on the stock with a target of Rs 175 per share.

Morgan Stanley, on the other hand, maintained its ‘equal weight’ stance on the counter with a target of Rs 165. The brokerage mentioned that margins at the lender during Q3 remained under pressure and were down 3 basis points (year-on-year). Furthermore, the brokerage estimated that the return on assets, or RoA, which came in at 1.4 per cent has been aided by favourable credit costs.

The brokerage also pointed out that, though the Treasury gains remained strong, they were deployed to offset the higher-than-expected wage hike run rate. The stock is available at cheap valuations and trading at 1.0x F25 core book; nonetheless, there is an absence of a strong catalyst.

How do other analysts view the stock?

The consensus recommendation from 28 analysts is a buy, Trendlyne data shows.

The stock in the last one year has largely underperformed the headline indices, with a return of just 4.7 per cent.