Federal Bank Gets ₹380 Target as Axis Direct Bets on Margin Recovery

**₹380 target price with a BUY recommendation.

Axis Direct projects PAT at ₹8,170 crore in FY29E, with earnings CAGR of 26% over FY26-FY29E.

Reader Takeaway:** Margin expansion and credit growth support the upside case; execution against ambitious FY29 estimates remains the key pressure point.

What just happened

Axis Direct analysts Dnyanada Vaidya and Abhishek Pandya have recommended buying Federal Bank with a target price of ₹380.

The brokerage's thesis rests on three operating drivers: stronger current-account and savings-account momentum, gradual net interest margin expansion and sustained credit growth.

Axis Direct expects improvements in portfolio mix to support NIM expansion of 5-6 basis points per quarter over the next three to four quarters. Federal Bank is also expected to pursue mid-teens credit growth with a positive bias.

Why this matters

The brokerage forecasts advances to compound at 17% annually between FY26 and FY29E, while deposits are projected to grow at a 15% CAGR. Net interest income is estimated to grow faster at 19%, while earnings are projected to compound at 26%.

That gap matters. If earnings grow materially faster than the balance sheet, Federal Bank could generate stronger profitability rather than relying only on loan-book expansion.

Axis Direct estimates net interest income at ₹12,878 crore in FY27E, ₹15,165 crore in FY28E and ₹17,849 crore in FY29E. Pre-provision operating profit is projected to rise from ₹8,849 crore to ₹13,076 crore over the same period.

Profit after tax is estimated at ₹5,543 crore in FY27E, ₹6,682 crore in FY28E and ₹8,170 crore in FY29E.

What changes now

Return ratios form another part of the investment case. Axis Direct expects return on assets to improve to 1.3-1.5% during FY27-FY29E, compared with 1.1% in FY26.

Return on equity is projected at 13-14% over FY27-FY29E versus 11.4% in FY26. The brokerage says the stock is trading at 1.7 times FY28E adjusted book value.

The CASA strategy is expected to support this improvement. Axis Direct sees stronger current-account balances through FY27, helped by business banking and channel expansion, alongside a shift toward higher-quality savings-account variants.

Risks to watch

The recommendation depends heavily on execution. Margin expansion of 5-6 basis points per quarter, mid-teens loan growth and improving return ratios all need to materialise for the projected earnings trajectory to hold.

The quality of growth also matters. Axis Direct's positive thesis assumes benign asset quality while Federal Bank expands its loan book.

What to track next

Investors should watch quarterly NIM movement, advances and deposit growth, CASA trends and asset quality against Axis Direct's estimates.

The longer-term benchmark is clear: FY29E net interest income of ₹17,849 crore, PAT of ₹8,170 crore and EPS of ₹29.8. Progress toward those numbers will determine whether the ₹380 target remains supported by operating performance rather than valuation expectations alone.