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After a correction post results, Federal Bank (FB)’s stock recently rallied ~10% owing to news-flow about inclusion of KVS Manian (Head - Wholesale & Private Banking, Kotak Mahindra Bank) as one of the 3 candidates for the post of MD & CEO (due to be vacated in Sep-24) at FB. Notably, Mr Manian has been handling wholesale banking at KMB for a while now, and has earlier headed consumer banking till 2014 – this position was then swapped with Shanti Ekambaram’s. This raised hopes for the replacement at FB with a pedigreed external candidate from a large bank as MD, after the current MD’s extension for another term was rejected by the RBI. But in a separate move, KMB has elevated Mr Manian as its JMD, subject to RBI approval and, hence, possibly dashed hopes of him being a candidate for the MD post at FB. Thus, we believe any stock run-up attributed to this news-flow should come off. That said, we retain BUY on FB and our TP at Rs180/sh, given the Bank’s healthy RoA/RoE trajectory, reasonable valuations (1x FY26E ABV), and lower exposure to unsecured retail loans.

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