Federal Bank Ltd. share price target

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

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%.

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.

We maintain our BUY recommendation on the stock.

Quarterly Update Q4FY23

Higher other income plus lower provisions aided 67% YoY PAT growth in Q4; NIM contracted due to deposit repricing

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%.