Stocks to Buy Today: On 7 November 2023, the financial services firm HDFC Securities published the latest research report on Federal Bank shares, assigning a ‘buy’ rating to the stock. The comprehensive analysis also provides valuable insights into the company’s financial health.
HDFC Securities is Bullish on Federal Bank and has recommended a ‘buy’ rating on the stock with a target price of Rs 190. Let’s take a closer look at their recommendations for the Federal Bank share price target set by HDFC Securities.
FB has strategically strengthened its position in the banking sector through a robust liability franchise and a well-diversified loan portfolio. By forming partnerships with FinTech companies, the bank is targeting unsecured lending and catering to the needs of salaried millennials, aiming to bolster growth in lucrative retail sectors to improve profitability.
Despite a slight projected dip in near-term Return on Equity (RoE) due to recent capital infusion, the outlook remains positive. The bank is expected to leverage these partnerships effectively to enhance productivity and is forecasted to see a Return on Assets (RoA) increase of 10-15 basis points between FY23 and FY26E. Coverage has been resumed with a strong buy recommendation and a target price (TP) of INR 190.
FB stands out in the banking industry with an 81% retail deposit mix, indicating a stable and detailed deposit base. It’s enhancing its offerings for non-resident (NR) customers and focusing on branch efficiency. The bank’s move to expand in the unsecured loan and other high-yield segments like gold loans, personal loans, credit cards, and microfinance indicates a drive towards accelerating revenue as these areas gain scale.
The bank’s partnership model with FinTech firms has proved successful, especially with neo banks like epiFi and Jupiter, which have scaled impressively, achieving 15,000 new accounts per day. These partnerships are maturing, focusing on attracting higher quality customers and balances.
Overall, FB is well-positioned to maintain consistent return ratios and is on a clear trajectory to become a top-tier bank. Growth is expected to be driven by solid loan expansion, a 10% compound annual growth rate in productivity, and gains in efficiency.
- CMP — Rs. 144
- Target — Rs. 190
- Type — Buy
- Report — Click Here
- Promoters: 0.0% (June 2023) and 0.0% (September 2023)
- FIs & Local MFs (Financial Institutions & Local Mutual Funds): 42.3% (June 2023) and 46.2% (September 2023)
- FPIs (Foreign Portfolio Investors): 26.3% (June 2023) and 27.0% (September 2023)
- Public & Others: 31.4% (June 2023) and 26.8% (September 2023)
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