Federal Bank shares rose nearly 5% after record second-quarter profit and decadal-low bad loans, but brokerages split over whether the rally has further to run.
Federal Bank shares climbed on Monday after the lender reported a sharp improvement in quarterly profitability and asset quality, prompting a fresh round of broker calls that split between optimism and caution. The stock rose as much as 4.74% to Rs 353, lifting the bank’s market capitalisation to Rs 87,044 crore, while turnover reached Rs 53.93 crore on 15.64 lakh shares traded. Technical indicators also pointed to steady momentum, with the relative strength index at 56.4, a level typically seen as neutral, and the shares trading above their five-day, 20-day, 50-day, 100-day and 200-day moving averages.
The rally came after Federal Bank posted a record second-quarter net profit of Rs 1,386.09 crore, up 45.10% from a year earlier. Net interest income rose 26.38% to Rs 3,153.40 crore, while operating profit increased 35.35% to Rs 2,225.37 crore and earnings per share climbed 44.34% to Rs 22.26. Asset quality strengthened further, with gross non-performing assets falling to 1.32% and net NPAs dropping to 0.17%, both decadal lows, according to the company’s results.
Other operating trends also improved. Financial Express reported that total deposits grew 18.61% to Rs 3,42,693.56 crore, while current account and savings account balances increased 22.56% to Rs 1,09,803.15 crore, taking the CASA ratio to 32.04%. Net interest margin widened to 3.32% from 3.06% a year earlier, and the cost of funds fell by 40 basis points. The bank’s total business crossed Rs 6.4 lakh crore, with gross advances above Rs 3 lakh crore, and fee income rose 31.86% to Rs 1,167.71 crore.
Brokerages, however, remain divided on how much of the improvement is already reflected in the share price. Axis Securities maintained a buy rating and lifted its target to Rs 405, saying the lender remains on track to deliver better returns on assets, supported by balance-sheet growth, portfolio optimisation and a stronger liability franchise. JM Financial, by contrast, kept a reduce rating and raised its target only slightly to Rs 330, arguing that the current valuation already captures the better outlook. Anand Rathi also stayed positive with a buy call and a target of Rs 406, while flagging the possible acquisition of Jana Small Finance Bank as a long-term risk if it proves dilutive to returns.
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