The bank’s earnings came under pressure from rising provisions and soft return ratios, while the stock broke key support levels with heavy volume.
Federal Bank shares fell 1.2% on Monday after its first quarter (Q1) results came in below expectations, with rising provisions and margin pressure dampening sentiment despite growth in fee income and deposits.
On Stocktwits, retail sentiment for Federal Bank was ‘bearish’ amid ‘normal’ message volume.
Q1 Earnings Review
SEBI-registered research analyst Saurabh Sahu shared a cautious view, pointing to a 15% year-on-year drop in net profit to ₹862 crore due to a sharp 60% rise in provisions, primarily from stress in the microfinance segment.
While advances grew 10% year-on-year to ₹2.45 lakh crore and deposits rose 8% to ₹2.87 lakh crore, core profitability showed strain as net interest income declined 2% sequentially and net interest margin fell to 2.94%.
He flagged rising slippages and weakening return ratios—RoA at 1.00%, RoE at 10.30%—as concerns despite healthy capital adequacy (CRAR at 16.03%) and provision coverage (PCR at 74.4%).
He also acknowledged the positive impact of record fee income at ₹786 crore, with total other income touching ₹1,113 crore, and a Current Account and Savings Account (CASA) ratio improvement to 30.35%.
However, he said the earnings lacked the strength to impress the Street.
Technical Outlook
On the technical front, Sahu observed that the stock broke key support at ₹200 on strong volume (10.9 million shares), forming a bearish lower high, lower low structure.
He placed immediate support at ₹188–190, next at ₹180 near the 200-daily moving average, with resistance levels at ₹200 and ₹208. The relative strength index (RSI) is likely in bearish territory below 50, and the trend appears weak.
Sahu’s outlook remains bearish below ₹200, with downside risk to ₹188–180.
He advised avoiding fresh long positions, adding that the technical view would be invalid above ₹210.
Brokerages Mixed
Nuvama maintained a ‘Buy’ with a target price of ₹230, while Morgan Stanley rated it an ‘underweight’ with a target price of ₹165. Nomura also downgraded the stock to ‘neutral’ and cut its target price to ₹195.
The stock has declined 3.4% so far in 2025.
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