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Dolat Capital Report
Federal Bank Ltd. reported a robust quarter with in net interest income growth at 15% YoY, stable net interest margin QoQ (+3 bps ex of penal interest impact), healthy loan growth at 4% QoQ, steady fee growth at 19% YoY, slippage at 0.8%, and low credit costs at 29 bps aiding return on asset 1.3%.
Fresh non-performing asset accretion across segments was steady. Despite some uptick in MFI/personal loan delinquencies, better than expected trends in secured books offset the impact.
Slippage should remain in the current range as per the bank, barring marginal uptick. Asset quality trends were better than anticipated, but seasoning of higher yielding newer portfolios remains a key monitorable.
We tweak earnings and maintain ‘Accumulate' rating with unrevised target price of Rs 215, valuing the bank at 1.4 times Sep-26E price/adjusted book value against RoA/RoE of 1.3%/15%.
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