On Friday, Federal Bank’s shares took a significant hit, dropping by over 4% after the bank revealed its Q4 results. The stock fell to ₹188.10 on the Bombay Stock Exchange (BSE), reflecting investor reactions to its latest financial performance.

Q4 Financial Highlights

Federal Bank reported a net profit increase of 13.7%, reaching ₹1,030.2 crore in the fourth quarter of FY25, compared to ₹906.3 crore from the same quarter last year. This growth signals a positive trend in profitability, although certain key metrics showed mixed results.

• Net Interest Income (NII) rose by 8.3% year-on-year, totaling ₹2,377.4 crore.
• The Net Interest Margin (NIM) improved to 3.12%.

Asset Quality and Growth

The bank also made strides in asset quality during the March 2025 quarter, with slippages recorded at approximately 90 basis points. Loan growth was reported at 2% quarter-on-quarter (QoQ) and 12% year-on-year (YoY), with mid-yield loans seeing a remarkable 19% YoY increase. Additionally, deposit growth accelerated to 7% QoQ and 12% YoY.

Analyst Insights on Federal Bank

Following the Q4 results, experts are weighing in on the future of Federal Bank shares. The bank’s profit after tax (PAT) surpassed expectations by 6%, aided by reduced credit costs and improved recoveries. However, the NII, which fell by 2% QoQ, did not meet consensus forecasts by 4%. This decline was attributed to a lower loan-to-deposit ratio (LDR) and a slight rise in cost of funds (CoF).

• Operating expenses surged by 8% QoQ due to significant branch expansions during the quarter.

Nuvama Institutional Equities highlighted Federal Bank as a robust mid-sized bank, capable of delivering strong growth. They noted that the bank’s current account (CA) acquisitions have increased by 50% in the first half of FY25.

Recommendations and Target Prices

Nuvama Equities has maintained a ‘Buy’ rating on Federal Bank, raising its target price from ₹215 to ₹230 per share. Meanwhile, Kotak Institutional Equities also holds a ‘Buy’ stance with a target price of ₹225 per share. They emphasize that, despite the challenges in achieving the desired NIM and return on assets (RoA) improvements, the valuations of Federal Bank shares remain attractive.

Market Performance

As of 12:45 PM, Federal Bank shares were trading at ₹188.95, down 3.89% on the BSE. Analysts suggest that while there may not be immediate triggers for a significant re-rating, the bank’s fundamentals and growth strategy position it well for the future.

With these insights, potential investors may want to consider the overall trajectory of Federal Bank as it navigates its growth strategy in a competitive banking landscape.