15 July 2020 Federal Banks (FB) PAT was higher than our estimates supported by treasury gains. However, core fee income declined sharply impacted by the lockdown and tepid loan growth. We have fine-tuned our FY21/FY22E estimates as we have moderated our fee growth assumptions and slightly increased business growth projections. 1QFY21 PAT stood at INR4.0b (~+4% YoY/+33% QoQ) significantly ahead of our estimates, mainly led by treasury gains of INR3b. The bank has prudently used the treasury gains to improve provisioning coverage and carries total COVID provisions of ~INR1.9b. NII grew 12% YoY (~INR13b) as margins increased 3bp QoQ to ~3.07%. Core fee income declined 32% YoY affected by the lockdown while higher treasury income resulted in total income growth of ~25% YoY. Opex grew ~12% YoY led by additional pension cost of INR350m. PPoP, thus, grew 19% YoY to INR9.3b while core PPoP (excluding treasury gains) declined ~9% YoY.