Federal Bank Q3 Results Review - Yet Another Strong Quarter Of All-Round Performance: ICICI Direct

ICICI Direct Report

Federal Bank Ltd. beat our estimates on most parameters. Business growth continued its healthy traction resulting in a strong operational performance. Asset quality continued to remain healthy with gross non-performing asset and net non-performing asset ratio at 2.43% and 0.73%, respectively.

Net interest income was up 27.1% YoY and 11.1% QoQ to Rs 1957 crore (ahead of our estimates of Rs 1822 crore), aided by healthy loan growth of 19.1% YoY and improvement in net interest margins by 19 bps QoQ at 3.49%.

Other income declined 12.4% QoQ mainly due to lower treasury income  Opex was up 9.7% YoY and ~4.9% QoQ, whereas cost/income ratio was steady at 48.8% (versus 54.8% in Q3 FY22).

Federal Bank's provisions declined both QoQ and YoY at Rs 199 crore, resulting in credit cost at 38 basis points versus 53 bps in Q2 FY23. Thus, profit after tax for the quarter beat our estimates at Rs 804 crore, up 54% YoY and 14.2% QoQ (versus our estimate of Rs 769 crore). Strong profit after tax resulted in highest return on asset at 1.33% (annualised).

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