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Yes Securities Report
Gross slippage ratio declines well below 1% whereas the 11-quarter average is an ultra-consistent 1.0%:
Federal Bank Ltd.'s recoveries and upgrades amounted to Rs 4.5 billion for Q4 FY24, implying net non performing assets deletion of -Rs 0.79 billion for the quarter. There were no one-offs in recoveries and upgrades during the quarter. The standard asset provision writeback amounted to about Rs 2 billion in FY24. Consequently, the credit cost for FY24 amounted to 23 basis points on normalized basis. Federal Bank will try to deliver a credit cost of 30 bps in FY25.
Net interest margin expanded sequentially on account of healthy recoveries but guidance for slight NIM expansion is structural and believable:
Management states that, as Federal Bank pivots into higher-yield businesses, there will a yield uptick, which would get more pronounced as the bank moves into FY25.
It may be noted that, apart from shift in headline loan mix, the mix within certain loan segments is also changing favorably. The margin should inch up two-three bps from 320 bps in FY25. This is despite cost of funds continuing to rise for at least the next couple of quarters.
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