Brokerage firm Axis Direct has recommended buying Federal Bank shares. It said that Federal Bank is its top pick for the week. In a research report, the brokerage has initiated buying Federal Bank shares for a target price of Rs 290, implying an upside of 10 per cent from the CMP of Rs 260.

Federal Bank is a private sector bank with a pan-India presence. It has exposure to Insurance and NBFC business through its joint venture with IDBI and its subsidiary FedFina. The bank continues to execute its strategy of a branch-light and distribution-heavy franchise proactively.

Axis Direct said that Federal Bank continues to witness strong traction in the focus segments and will continue to drive growth momentum as it exits FY26.

The bank has seen a growth pick-up in Q3 following a muted performance over H1, and the outlook around growth continues to remain encouraging, the brokerage said.

"We expect Federal Bank's RoA improvement to 1.3-1.4 per cent over FY27–28E, compared with a relatively subdued 1.1 per cent in FY26E, supported by healthy risk-adjusted credit growth, margin improvement levers playing out with portfolio mix shift towards better-yielding segments and lower CoF, strong deposit franchise with improving CASA mix, strengthened fee income profile, and stable asset quality metrics keeping credit costs under control," it said.