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Dolat Capital Report
The Federal Bank Ltd. reported strong quarter with net interest income growth of 27% YoY/11% QoQ. Contained opex, improving fee lines, and low credit costs supported profit after tax growth of 54% YoY.
Net interest margins at 3.49% expanded by 20 basis points QoQ. Return on assets at 1.32% were at its highest in the last eight years.
Asset quality metrics were stable with contained slippages at 1% and sequential rise in provision coverage ratio to 70%. Sequential loan growth was broad based, with slightly higher share from corporate.
Federal Bank's ability to sustain healthy NIMs remains a monitorable once liabilities re-price over the quarters. We factor in ~10 bps moderation in NIM over FY24/25E against 3.35% in FY24E. Earnings upgraded by 5%/6%/9% for FY23E/24E/25E, factoring in higher NIM and slightly lower credit costs.
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