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Dolat Capital Report
The Federal Bank Ltd. reported a good quarter with healthy growth trends, sequentially higher net interest margin at 3.27%, improving fee lines and encouraging asset quality.
Despite expansion in NIM to 3.27%, core operating profits were flat YoY (down 1.6% YoY), impacted mainly by higher opex.
While spreads were flattish QoQ owing to compression in lending yields, NIM expansion of 7 basis points was led by efficient use of liquidity and higher loan-deposit ratio.
We build in 5-7 bps of NIM expansion over FY23/24E from FY22E levels.
Federal Bank's core pre-provision operating profit metrics at 1.6% remained muted, with profit after tax growth of 29% YoY driven by sharp decline in provisions.
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