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IDBI Capital
Federal Bank (Buy)
Target: ₹96
CMP: ₹84.35
Federal Bank has reported stable asset quality with GNPA at 3.41 per cent vs 3.38 per cent q-o-q (vs 2.84 per cent y-o-y) led by lower slippages and higher write offs. Covid Specific Restructuring assets stood at 1 per cent of total advances well within guided range of 1.2-1.3 per cent.
However, stressed book as a percentage of assets which was declining for last 3 years spiked to 1.76 per cent vs 1.08 per cent q-o-q due to Covid-19 impact. Net interest income grew by 17 per cent y-o-y (24 per cent y-o-y growth Q3FY21) led by improvement in NIMs which stood at 3.2 per cent.
Operating profit declined by 8 per cent y-o-y driven by decline in other income (down 35 per cent y-o-y; 3 per cent q-o-q) while PAT grew by 59 per cent y-o-y (18 per cent q-o-q) led by lower provisions (down 57 per cent y-o-y; 42 per cent q-o-q.
Collection efficiency remains stable at 95 per cent q-o-q in March month. Credit growth improved to 9 per cent y-o-y vs 5.3 per cent y-o-y (Q3FY21); deposits growth stood at 13 per cent y-o-y vs 12 per cent y-o-y (Q3-FY21).
We revised the estimates upwards (FY23 BV up 3 percent ) and re-iterate ‘Buy’ with a new target price of ₹96 (earlier ₹90).
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