Stock Update - Federal Bank

Federal Bank Q1FY24 update – Strong business growth at 21% YoY - Gaurav Jani - Research Analyst, Prabhudas Lilladher Pvt Ltd

♦ Gross advances growth was strong at 21% YoY/5.2% QoQ.

♦ Loan growth was driven by corporate, +21.6% YoY while retail grew at 20.2% YoY.

♦Sequentially wholesale/retail growth was ~3%/6% (Retail:wholesale mix steady at 54:46)

♦ Deposit accretion was at 21.4% YoY and 4.3% QoQ; wholesale TD growth was higher to that of retail

♦ CASA at 31.9% was down 83bps QoQ and 500bps YoY with growth of 1.6% QoQ & 4.9% YoY.

♦ At CMP of Rs126 stock is trading at 1.2x/1.1x FY24E/FY25E. We have a BUY rating with a TP of Rs170 (1.5x Mar-25 ABV).

PL View

Provisional numbers were a bit mixed; while retail growth sequentially was a bit higher at 5.5%, wholesale continues to grow. Hence growth in the higher yielding retail pool is the key monitorable which could decide the NIM trajectory for Q1’24. Also, bank seems to incrementally rely on wholesale deposits; RTD+CASA in Q4FY23 made up 88.4% of deposits (94% in Q4FY22).