Buy This Banking Stock For Up To 32% Gains, Says This Broking Firm

Emkay Global has listed the stock of Federal Bank as a "stock to buy" for gains of up to 32% from the current levels.

Federal Bank: Transforming into next generation private bank

According to Emkay Global, Federal Bank is transforming itself into a next-generation private bank via its neo-banking tie-ups across assets, liabilities, and payments businesses. This should not only help the bank thrive in the new era of banking, but also reduce the incremental cost of business and garner better fees/revenues in the long run.

According to Emkay Global better margins are being driven by change in portfolio mix and the moderation in credit cost to boost RoA

"The bank has long struggled to cross the 1% Return on Assets hurdle due to lower margins, sticky & higher opex and the recent surge in credit costs due to Covid-induced exogenous factors. However, we expect margins to improve gradually as the bank focuses on high-yielding products such as commercial vehicles, MFI, persona loans and Cards. Re-pricing of mortgage book in a rising interest cycle will provide back-end support. This, coupled with steady moderation in operational expenditure on the back of digital adoption and credit costs, should drive up Return on Assets on a sustainable basis beyond 1% by FY24E," the brokerage has said.

Federal Bank: Buy the stock with a price target of Rs 110

According to Emkay Global Federal Bank remains its preferred pick in the small/mid-cap space, apart from Equitas, given its better liability/asset quality profile, management stability, digital adoption and expected improvement in return ratios.

"We retain a Buy on the stock with a target price of of Rs 110," the brokerage has said.

Disclaimer

The above stock is picked from the brokerage report of Emkay Global. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article. The above report is for informational purposes only.