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HDFC Securities Retail Research
Federal Bank Ltd. is one of the best placed mid-tier old private sector banks. The bank has strong granular liability franchise and comfortable capital positioning which can act as a cushion against any uncertain eventuality of asset quality shocks.
Recently, the bank has redesigned its growth strategies and now is planning to change itself into next-gen private sector bank with digital tie-ups across assets, liabilities, and payments segments.
Federal Bank’s FinTech partnerships is in line with its branch-light, distribution-heavy strategy which is return on asset accretive and can bring productivity and efficiencies.
We are constructive on Federal Bank’s ability to monetise these partnerships and build scalable profit pools. Further, it is also diversifying into high margin business like retail products, commercial vehicle /construction equipment loan, micro-credit, credit cards etc. In Q1FY23 numbers the incremental growth from these verticals were visible.
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