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Anand Rathi's research report on Federal Bank

Strong growth in non-interest income was counterbalanced by weak NII and higher opex which led to ~3% sequential de-growth in core operating profits for Federal bank. Lower provisions (one large recovery of ~1.1bn led to lower provisions) supported profitability with RoA coming at 1.24%. We believe bank’s strategy for 1) better deposit profile with higher CASA and retail deposits, 2) margin accretive products in loan book and 3) conservative provisioning practices would lead to a structurally better NIM/RoA profile for the bank in the medium to long run, however, rate cut cycle would keep pressure on the margins in the near term.

Outlook

Ahead, we expect the bank to deliver high-teen growth and generate a sustainable 1.2% RoA through FY26/27. We maintain a Buy rating on it with a TP of Rs 246, 1.3x P/ABV on its FY27e book.

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Federal Bank - 02052025 - anand

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