Axis Securities Selects Federal Bank as Stock Pick with Rs 290 Target and 10% Upside

Axis Securities names Federal Bank (FB) as its stock pick of the week. The brokerage sets a target price of Rs 290. That implies about 10% upside from the current market price. Axis Securities uses a six to nine month horizon. The call rests on improving NIMs, manageable asset quality, and growth showing a revival.

Axis Securities links the view to Q3 trends and FY26 to FY28 expectations. The brokerage points to a NIM surprise in Q3. It also notes Federal Bank’s focus on mid-yield segments. Alongside this, deposits and fees are seen supporting returns. Key guidance includes credit costs and medium-term growth targets after a Blackstone infusion.

The report flags specific levels investors often track. These include the target price, the implied upside, and expected credit costs. It also highlights the bank’s growth ambition versus nominal GDP growth. The table captures the main figures referenced by Axis Securities.

Item	Detail
Stock pick	Federal Bank (FB)
Axis Securities target price	Rs 290
Implied upside	10%
Time horizon	Six to nine months
Credit cost guidance	55-60 bps in FY26
Growth aim after Blackstone infusion	1.2-1.5x Nominal GDP growth
FY27E growth target	~16%

Axis Securities says Federal Bank keeps prioritising NIM improvement. The bank targets select mid-yielding segments for growth. It is also adjusting its liability mix. The focus is on CASA deposits, mainly CA deposits. Axis Securities expects a near-term NIM lift, as 2/3rd of the Dec'25 rate cut is yet to show in lending yields.

Federal Bank asset quality and growth outlook by Axis Securities

The brokerage does not see overall asset quality as alarming. It adds that mid-yield portfolio growth can raise credit costs slightly. Axis Securities argues the higher yields can offset this risk. Federal Bank guides credit costs at 55-60 bps in FY26. Axis Securities also says traction remains strong in focus segments, helping momentum as Federal Bank exits FY26.

"The bank has seen a growth pick-up in Q3 following a muted performance over H1, and the outlook around growth continues to remain encouraging. We expect FB's RoA improvement to 1.3-1.4% over FY27-28E, compared with a relatively subdued 1.1% in FY26E, supported by (1) healthy risk-adjusted credit growth, (2) margin improvement levers playing out with portfolio mix shift towards better-yielding segments and lower CoF, (3) strong deposit franchise with improving CASA mix, (4) strengthened fee income profile, and (5) stable asset quality metrics keeping credit costs under control," commented the research analysts of Axis Securities in a report.

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Axis Securities bases its Federal Bank view on margins, credit costs, and a better growth tone after Q3. The report also ties its expectations to deposit mix improvement, including CASA and CA deposits. With Blackstone’s growth capital infusion noted, Axis Securities focuses on steady expansion targets and FY27E growth expectations while keeping asset quality risks under watch.