Motilal Oswal's research report on Federal Bank
FB posted a mixed quarter, with an 8% beat in PAT and a 6% miss in NII. PAT grew 67% YoY to INR9b, aided by low provisions. The NII miss was due to an 18bp fall in NIM to 3.31%. FB has prudently increased the PCR to ~71%. Gross advances grew 20.1% YoY, driven by a broad-based pickup in all business segments. Deposit growth too was healthy, aided by strong traction in term deposits. Thus, the CASA ratio moderated to 32.7%. Slippages came in at INR4.5b (~1.0% of loans), led by a QoQ increase in the Agri and SME segments. GNPA/NNPA ratios declined to 2.36%/0.69%, while restructured loans too improved ~20bp QoQ to ~1.6%. FB reported RoA/RoE of 1.45%/17.5% in 4QFY23. We broadly maintain our estimates as controlled credit costs and healthy other income compensate for a slight drop in NII. We estimate FB to deliver RoA/RoE of 1.3%/15.8% in FY25. We reiterate our BUY rating on the stock.
Outlook
We estimate FB to deliver RoA/RoE of 1.3%/15.8% in FY25. We reiterate our BUY rating with a TP of INR155 (1.2x Sep’24E ABV).
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