Federal Bank Shares Hit Yearly High Amid Strong Deposit and Credit Growth

Federal Bank’s shares hit a 52-week peak of Rs 151.9 on Tuesday, driven by a notable 23% year-on-year increase in total deposits and a 20% rise in gross advances for the second quarter of fiscal year 2024. The bank’s stock has experienced a modest gain of 8.71% this year.

The expansion in the bank’s retail and wholesale credit segments is significant, with growth rates of 22% and 17%, respectively. Additionally, there has been an increase in both customer and term deposits. However, the Current Account Savings Account (CASA) ratio, an important measure of a bank’s financial health, has fallen to 31.1%.

Despite this, Federal Bank continues to be a key player in the banking sector, with shareholders reaping high returns on book equity.

Motilal Oswal Financial Services expresses a positive outlook for Federal Bank’s future performance. Although there are concerns regarding net interest income linked to rising deposit costs, the financial services firm anticipates continued growth for the bank. This optimism is bolstered by data indicating that the bank’s price-to-earnings (P/E) ratio is relatively low at 3.21, suggesting potential undervaluation.

Given these assessments, two key points emerge: Federal Bank is currently trading at a low P/E ratio in relation to its near-term earnings growth, and it has demonstrated strong returns over the past three months.

This article was generated with the support of AI and reviewed by an editor.