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The market expects Federal Bank to carry on much as it has.
At today’s share price, buyers are assuming Federal Bank earns about 15.1% a year on the money invested in it, from here on. Over the last ten years it actually earned about 13.3% a year. The two are close, so the share price does not need the business to improve or to stumble. It needs it to keep doing roughly what it already does.
- How it is valued: Excess return — the correct lens for a bank.
- What the price assumes: 15.1% return on equity, against 13.3% the model takes from its own record.
- Ten-year record: Between FY2018 and FY2026, Federal Bank's revenue went from ₹11,075 crore to ₹34,272 crore — it compounded at about 15% a year over 8 years.
- Biggest swing factor: Return on equity. Main risk: Margin pressure.
01A Kerala bank with a global customer base
Federal Bank, headquartered in Aluva, Kerala, is a mid-sized private-sector bank. It handles a large share of inward remittances to India from non-resident Indians, especially from the Gulf, which gives it a strong deposit base.
It lends to retail, business and corporate customers across India and has built fintech partnerships to grow digitally. KVS Manian became chief executive in 2024.
02What the market is assuming
Work backwards from today's share price and you can see what buyers are quietly taking for granted. Here is the return on equity that price implies for Federal Bank, next to what the model assumes from the company's own record.
The further apart these two numbers are, the bigger the bet a buyer at today's price is making.
03Federal Bank's record, in plain numbers
Between FY2018 and FY2026, Federal Bank's revenue went from ₹11,075 crore to ₹34,272 crore — it compounded at about 15% a year over 8 years. Net profit grew from ₹910 crore to ₹4,483 crore, about 22% a year — faster than revenue, so margins widened. In FY2026 it kept 13.1% of revenue as net profit — against a low of 8.2% in FY2018 and a high of 15.7% in FY2023. The latest year added 7.0% to revenue, well behind its own long-run pace.
Revenue and earnings per share in ₹, return on equity and leverage as ratios — all from the filed statements.
Revenue and net profit by year (₹ crore)
| Year | Revenue | Net profit | Margin |
|---|---|---|---|
| FY2018 | 11,075 | 910 | 8.2% |
| FY2019 | 12,971 | 1,283 | 9.9% |
| FY2020 | 15,472 | 1,553 | 10.0% |
| FY2021 | 16,272 | 1,647 | 10.1% |
| FY2022 | 16,502 | 1,965 | 11.9% |
| FY2023 | 20,248 | 3,176 | 15.7% |
| FY2024 | 26,782 | 3,928 | 14.7% |
| FY2025 | 32,030 | 4,201 | 13.1% |
| FY2026 | 34,272 | 4,483 | 13.1% |
04How Federal Bank gets valued — and why
Excess return — the correct lens for a bankA bank is not valued with a discounted cash flow. Deposits are its raw material and interest is operating income, so enterprise value means nothing here. It is valued on excess return instead — the profit it earns above the cost of the equity funding it.
05What decides Federal Bank's value
Return on equity
Lifting returns closer to larger private banks.
Deposit franchise
NRI deposits provide stable funding.
Higher-yield lending
Growing credit cards, personal and business loans.
Asset quality
A clean book supports profit.
06What could go wrong
- Margin pressure. Rate cuts and competition squeeze spreads.
- Unsecured growth. Faster consumer lending adds risk.
- Gulf economies. Remittance flows depend on the Gulf.
07What the full Federal Bank valuation shows
Sign in free to see the complete Federal Bank valuation
- ✓Fair value per share — from the excess-return model banks are valued on
- ✓The bank workpaper — book value, cost of equity and sustainable return, step by step
- ✓Bull, base and bear cases — and exactly which assumptions move between them
- ✓Peer comparison — against IndusInd Bank, AU Small Finance Bank and Axis Bank
- ✓Downloadable report — the full write-up, yours to keep
08Questions people ask about Federal Bank
Why is Federal Bank strong in remittances?
It has long served Kerala's large non-resident community, especially in the Gulf.
Who runs Federal Bank?
KVS Manian has been chief executive since 2024.
How is Federal Bank valued?
On excess return: what it earns above its cost of equity.
Is Federal Bank overvalued?
At ₹361 the market is pricing in roughly 15.1% sustained ROE, against the ~13.3% its own record supports. That is more than it has delivered, so the price is justified only if the business can hold a rate it has not previously sustained.
What is the intrinsic value of Federal Bank?
It is computed from the filed financial statements using the method that fits this business (excess return), with every assumption shown alongside the result. The per-share figure and the full working are in the report.
How much debt does Federal Bank carry?
Debt to equity stands at 0.82, down from 0.83 at the start of the period — the balance sheet is a core input to the cost of capital used here.