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Motilal Oswal Report
Federal Bank Ltd. reported a mixed quarter as net earnings stood at Rs 9.1 billion (in line), led by lower other income and higher opex (wage provisioning of Rs 1.62 billion). Net interest income was in line with our estimate, aided by a 2 bp QoQ expansion in margins.
Advances growth was healthy at 20% YoY/5.1% QoQ. Deposits grew 18% YoY/5.4% QoQ, aided by continued traction in term deposits. The current account and savings account ratio moderated 125 bp QoQ to 29.4%. Fresh slippages moderated to Rs 3.5 billion from Rs 4.8 billion in Q3 FY24.
Gross non-performing asset/net non-performing asset ratios improved 16 bp/4 bp QoQ to 2.1%/0.6%. Restructured book declined ~14 bp QoQ to 1.0%.
Federal Bank reported return on asset/return on equity of 1.2%/12.8% in Q4 FY24. We fine-tune our estimates and expect Federal Bank to deliver RoA/RoE of 1.36%/15.1% in FY26.
We reiterate our Buy rating on the stock.
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