Federal Bank Q1 Results Review- Net Interest Margin Trajectory Remains Key; Maintain Accumulate: Dolat Capital

Dolat Capital Report

Federal Bank Ltd. posted In-line numbers with net interest income growth at 20% YoY, and 15 basis points QoQ moderation in net interest margin to 3.15%.

Core pre-provision operating profit/assets decline to 1.65% (1.9% in FY23). However, priority sector lending certificates/treasury gains and lower provisions aided profits, up 42%. YoY.

Slippages contained at 1.1%, with broad based loan growth at 4-6% QoQ across segments. High yielding focus segments like personal loan/commercial vehicle/BuB grew at 12%/17%/7% QoQ.

We continue to factor ~10 bps NIM decline in FY24E.

Tweaking estimates and factoring better growth, maintain 'Accumulate' with an unrevised target price of Rs 150 (1.2 times FY25E price/adjusted book value) against return on asset/return on equity of 1.2%/13% for FY24/25E.

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