Shares of Federal Bank slipped 7% intra day after the lender reported its Q3 earnings. Net profit slipped 5% to Rs 955 crore in Q3 compared with Rs 1007 crore in the year ago period. However, the lender reported its highest ever pre-provision operating profit. Federal Bank shares fell 7% to Rs 178.15 against the previous close of Rs 191 on BSE. Later, the stock closed 3.61% lower at Rs 184.10 on BSE today.
The banking stock stock slipped to a 52-week low of Rs 139.80 on March 14, 2024. Rekha Rakesh Jhunjhunwala, wife of late investor Rakesh Jhunjhunwala, held 3.45 crore shares or 1.42 per cent stake in the private lender at the end of December 2024 quarter.
Market cap of the bank stood at Rs 45,177 crore. The banking stock has a one-year beta of 0.9, indicating average volatility during the period.
Total 10.25 lakh shares of the bank changed hands amounting to turnover of Rs 18.62 crore on BSE.
The bank has made provisions of Rs 292 crore in the December quarter. Total provisions came at Rs 292 crore post adjustment of regular provisions and provisions write-back compared with Rs 91 crore in the year ago period. Its provision coverage ratio rose to 74.21% from 71.08%.
Asset quality improved with gross non-performing assets ratio slipping to 1.95% at the end of December 2024 quarter against 2.29% a year back. Net NPA ratio stood at 0.49% against 0.64%.
Operating profit rose to Rs 1570 crore in Q3 against Rs 1437 crore, buoyed by 14.5% expansion in net interest income at Rs 2,431 crore. Fee income also rose 21% year-on-year.
Brokerage Nuvama has reduced its target price for the lender to Rs 215 from the earlier Rs 235 but retained its buy call.
"Federal Bank reported soft PPOP and growth, but strong asset quality in Q3FY25. We are cutting EPS to factor in slower-than-normalised growth in the near term and higher credit cost with the guidance on credit cost revised up from 30–35bp to 40–45bp. We are reducing target price to Rs 215/1.4xBV from Rs 235/1.5x; maintain ‘BUY’," said Nuvama.
Global brokerage JPMorgan maintained its 'Buy' stance on banking stock with a target price of Rs 215. Operating performance exceeded expectations, but higher provisions led to a miss on overall results, said the brokerage. JPMorgan said that FY25 headline estimates could be revised downward, while FY26 guidance will largely depend on the direction set by the new CEO.
UBS maintained a Buy call on the Federal Bank stock and reduced its target price to Rs 235 from Rs 250. Profit after tax (PAT) came below expectations due to higher provisions, while loan and deposit growth remained subdued. UBS expects a downward revision in management's previous guidance for FY25.
In terms of technicals, the relative strength index (RSI) of the stock stands at 42.8, signaling the stock is trading neither in the oversold nor in the oversold zone. Federal Bank shares are trading lower than the 5 day, 20 day, 50 day, 100 day and 200 day moving averages.