Check Before You Invest : The Federal Bank Ltd

BSE: 500469 NSE: FEDERALBNK ISIN: INE171A01029

| Sector: BFSI | Industry: Bank - Private

Snapshot

Q.1 Which industry/sub-sector does The Federal Bank Ltd belong to?

The Federal Bank Ltd belongs to the BFSI sector, operating specifically within the Bank - Private segment.

Q.2 Is The Federal Bank Ltd a good quality company?

The Federal Bank Ltd is a average quality company, based on a somewhat consistent 10-year financial track record.

Q.3 Is The Federal Bank Ltd undervalued or overvalued?

The Federal Bank Ltd appears Overvalued, as its key valuation ratios are above with their past averages.

Q.4 Is The Federal Bank Ltd a good buy now?

The Federal Bank Ltd is a neutral opportunity now, based on stable price trend analysis suggesting prices may move sideways. However, you need to check its quality and valuation before making a decision

Performance Analysis

Q.1 Total Income growth of The Federal Bank Ltd?

The Federal Bank Ltd Total Income growth is 19.6% for FY-2025, which is above its 5-year CAGR of 15.66%, indicating faster growth.

Q.2 Return on Assets of The Federal Bank Ltd?

The Federal Bank Ltd Return on Asset is 1.2%, which is in line with its 5-year historical median of 1.2%, indicating stable earnings on assets.

	Current Level	5-year Historic Median
NIM%	3.06	3.06
PPOP%	18.17	18.17
RoA%	1.2	1.2

Q.3 Return on Equity (ROE) of The Federal Bank Ltd?

The Federal Bank Ltd Return on Equity is 13% for FY-2025, which is in line with its 5-year historical median of 13%, indicating the business is making similar use of its shareholders capital.

Q.4 Pre-provisioning operating profit margin of The Federal Bank Ltd?

The Federal Bank Ltd Pre-provisioning operating profit margin, which is the bank’s core operating profit before provisioning for bad loans, is 18.17% for FY-2025, which is in line with its 5-year median(18.17%), indicating stable margins.

Q.5 Net Interest Margin of The Federal Bank Ltd?

The Federal Bank Ltd Net Interest Margin, which is the difference between the rate of interest earned on assets and the rate of interest paid on liabilities, is 3.06% for FY-2025, which is in line with its 5-year median( 3.06%), indicating stable margins.

Q.6 Total Asset growth of The Federal Bank Ltd?

The Federal Bank Ltd Total Asset growth is 13.31% for FY-2025, which is below its 5-year CAGR of 14.46%, indicating slower growth.

Q.7 Cost to Income ratio of The Federal Bank Ltd?

The Federal Bank Ltd Cost to Income ratio which represents the cost incurred for every Rs.100 earned is 54.8% for FY-2025, is higher its historical 5-year median of 53.8%, indicating improved cost management.

Q.8 Capital Adequacy ratio of The Federal Bank Ltd?

The Federal Bank Ltd Capital Adequacy ratio (CAR) is 16.40% for FY-2025, which is above the regulatory requirement of 12%, indicating strong capital position.

Q.9 Asset Quality of The Federal Bank Ltd?

The Federal Bank Ltd Gross Non-Performing Assets, which are loans overdue by more than 90 days, is 1.84% for FY-2025, which is below its 5-year median 2.36%, while Net Non-Performing Assets, which is GNPA minus provisions made for bad loans is 0.44% which is below its 5-year median( 0.69%), indicating improving asset quality.

Ownership & governance

Q.1 Promoter shareholding and pledge status of The Federal Bank Ltd?

Promoters hold 0.00% of the The Federal Bank Ltd, with 0.00% of their stake pledged, indicating no pledge risk.

Peer comparison (industry-wise, mcap)

Q.1 AUM Growth of The Federal Bank Ltd vs Industry Peers?

The Federal Bank Ltd AUM CAGR is 14.46%, compared to the 5-year industry median CAGR of 12.53%, indicating faster growth and gaining its market share.

Q.2 Profit metrics (NIM, PPOP, RoA) of The Federal Bank Ltd vs industry peers

The Federal Bank Ltd profit metrics are in line with the industry median level of 7.74%, indicating similar profitability compared to peers.

Profit Metrics

	Current Level	5-year Industry Median
NIM%	3.06	3.84
PPOP%	18.17	18.17
RoA%	1.2	1.2

Q.3 Operating efficiency of The Federal Bank Ltd vs industry peers?

The Federal Bank Ltd Cost to Income (52.85) is below the industry median of (53.8); while the current ROE (13) are above than the 5-year average Industry ROE (10.2). This shows that the business is positioned in the middle quartile of the industry.

Operating Efficiency

	Current Level	5-year Industry Median
NIM%	3.06	3.84
PPOP%	18.17	18.17
RoA%	1.2	1.2
Cost to Income%	54.8	53.8
ROE%	13	10.2

Valuation & price assessment

Q.1 Stock return of The Federal Bank Ltd over the last decade?

Over the last 9 years, the stock has delivered a CAGR of 20% based on the current price.

Q.2 What return has the stock given over the last decade?

	9Y	5Y	3Y	1Y
Share Price CAGR	20%	29.1%	28.2%	51.3%

Q.3 How do the current valuation ratios compare with 5-year historical median and industry numbers?

Valuation Ratios	Current	5-year Historic Median	5-year Industry Median
Price to Earnings	16.28	10.88	13.38
Price to Book	1.84	1.37	1.37
Price to Sales	2.38	1.77	1.77
EV to EBITDA	10.59	9.48	7.70

Q.4 Valuation ratios of The Federal Bank Ltdvs historical and industry averages?

The current Price to book ratio (P/B) 1.84% is higher than its historical median of 1.37%, indicating that at the current price the stock is overvalued. However, you need a deeper analysis to make a better judgement.

Strategic outlook

Q.1 Does its ROIC exceed its WACC?

The Federal Bank Ltd return on invested capital (ROIC) is 26.65% for FY-2025, is higher than its estimated weighted average cost of capital (WACC) of 11.25%, indicating value creation.

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