Federal Bank Q4 Results Review - Net Interest Margins Stable QoQ; One Off Opex Impacted Profits: IDBI Capital

IDBI Capital Report

Federal Bank Ltd.'s net interest margins remained stable during Q4 FY24 led by increase in yield on advances. Credit growth improved to 20% YoY (versus 18% YoY Q3 FY24) backed by retail and SME portfolio.

Deposits growth stood at 18% YoY versus 19% YoY (Q3 FY24). Management guided for 18% credit growth and 16% deposit growth for FY25.

Federal Bank's asset quality improved with gross non-performing asset at 2.13% versus 2.29% QoQ. Net interest income grew by 3% QoQ; operating profit declined by 23% QoQ led by one off expenses of Rs 1.6 billion towards employee retirement benefits.

Write back of provisions during Q4 FY24 supported the profitability; result return on asset to 1.22% (1.39% Q3 FY24).

Management guided RoA to improve at pace of 5-7bps per annum in FY25. We have maintained estimates and Buy rating with the target price of Rs 200 based on pre-Covid average price/adjusted book value of 1.4 times FY26.

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