Buy Federal Bank; target of Rs 230: Motilal Oswal

Motilal Oswal's research report on Federal Bank

Federal Bank (FB) reported 4QFY25 earnings of INR10.3b (12% beat) amid lower provisions and healthy other income. NII was in line, while NIM stood broadly flat (up 1bp QoQ to 3.12%), as the bank focused on reorienting its asset mix with the goal of improving yields and increasing its CASA deposits. Advances grew 12% YoY/ 2% QoQ, while deposits grew 12.3% YoY/6.5% QoQ, largely driven by CA deposits. The CASA mix improved 7bp QoQ to 30.2%. Total slippages stood at INR4.9b vs INR5b in 3QFY25. GNPA/NNPA ratios declined 11bp/5bp QoQ, respectively, to 1.84%/0.44%, while restructured book declined 7bp QoQ to 0.6%. Credit cost stood at 26bp for 4QFY25.

Outlook

We fine-tune our earnings projections and estimate RoA/RoE of 1.25%/14.0% by FY27. Reiterate BUY rating with a TP of INR 230 (1.4x FY27E ABV).