Federal Bank Q1 Results Review - All Time High Profitability: IDBI Capital

IDBI Capital Report

Federal Bank Ltd. credit growth remained strong at 20% YoY (versus 20% YoY FY24) led by growth across the segments. Deposits growth improved to 19% YoY versus 18% YoY (FY24) backed by NRE deposits.

We revised credit growth upwards to 19% YoY for FY25 versus 18% YoY earlier. Net interest margins declined by 5 bps QoQ during Q1 FY25 led by decline in yield on advances however, guided for stability in next two quarters.

Asset quality remains stable with gross non-performing asset at 2.11% versus 2.13% QoQ. Net interest income grew by 4% QoQ; stable provisions (down 7% YoY) supported the profitability (all time high). This resulted RoA to 1.27% (1.22% Q4 FY24).

Federal Bank's management guided RoA to improve to ~1.35% levels going forward. We have revised estimates upwards (up 4% adjusted book value FY26E) and maintain Buy rating with the target price of Rs 240 (earlier Rs 200) based on 1.6 times FY26 versus earlier 1.4 times (as RoA continue to improve).

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