Federal Bank Ltd. share price target

Federal Bank’s Q1FY24 net profit was 42.1% in-line with our estimates driven mainly by a 35% YoY growth in operating profit. However, the stock evoked a strong negative reaction driven by continuous decline in margin by 16bps QoQ to 3.16%.

Despite QoQ decline in NIMs and rise in provisioning, Federal Bank (Federal) reported reasonable Q1FY24 PAT of Rs8.54bn (up 42% YoY, down 5% QoQ), driven by strong ‘other income’.

We re-iterate a BUY on the stock with a target price of Rs 155/share, implying an upside of 22% from CMP

Quarterly Update Q4FY23

Multi-quarter high RoA / RoE at 1.45% / 17.5% despite 18bps QoQ decline in NIM, steady decline in net stressed asset portfolio to 1.6%, advance growth at 20% YoY and 34% YoY growth in core fee income summarise Federal Bank’s (FB) strong financial performance in Q4FY23.

Federal Bank’s Q4FY23 net profit was 12.2% ahead of our estimates driven mainly by a sequentially sharp decline in non-tax provisions (? 1,167mn, (41%) QoQ). Although the core income growth was strong and in-line with estimates, the stock evoked a strong negative reaction driven by the sharp, 18bps QoQ decline in reported NIMs to 3.31%.