Brokerage firm CLSA has initiated coverage on Federal Bank Ltd. and projected an upside of nearly 19% on the stock from its previous closing price.

CLSA initiated coverage with a “buy” rating on Federal Bank with a price target of ₹230 per share. The stock ended Thursday’s session at ₹194.14 apiece.

The brokerage said that while the lender has done well in the past decade, it has been a relatively ‘local’ bank with average profitability. Its strengths lie in its large non-resident deposit franchise and its conservative lending practices, CLSA said.

With a new MD and CEO KVS Manian at its helm, the target is to gradually transform into a larger bank with return metrics closer to those of the six large private sector banks, the brokerage added.
CLSA said while Federal Bank’s near-term outlook is muted, it expects the bank to improve returns over the next three years — with a 14% return on equity (RoE) in financial year 2027 and the 2028 calendar year compared to an average RoE of 11% over the past decade.

CLSA said the stock is inexpensive at 1.1 times price-to-book and nine times its price-to-earnings for financial year 2027.

Of the 43 analysts that have coverage on the stock, 38 have a “buy” rating, four have a “hold” rating and one has a “sell” rating.

Federal Bank shares gained 1.15% to hit an intraday high of ₹196.39 apiece on Friday, April 4. The stock has gained nearly 11% in the past month.

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