Sharekhan's research report on Federal Bank
Federal Bank released its Q3FY2023 business update, wherein gross advances grew by healthy 19.1% y-o-y to Rs. 1.71 trillion. However, advances growth moderated sequentially to 4.3% vs. 6.2% in Q2FY2023 but still remains healthy. Retail credit grew by 19.1% YoY, while wholesale book also posted strong ~19% y-o-y growth. With this, the share of retail in the total loan mix stands at 54% in Q3FY2023. Total deposits grew by 14.8% y-o-y/6.5% q-o-q to Rs. 2.0 trillion. Total customer deposits grew by 12.8% y-o-y/5.1% q-o-q, while CASA grew by 7.2% y-o-y/0.2% q-o-q. As a result, CASA ratio declined by 216 bps q-o-q to 34.2%. Growth in term deposit came in at 16.1% y-o-y/8.1% q-o-q vs. 7.2% y-o-y/2.0% q-o-q in Q2FY2023.
Outlook
At the CMP, the stock trades at 1.3x/1.2x/1.0x its FY2023E/FY2024E/FY2025E BV. We expect ~1.2% ROA/~14% ROE in FY2025E. We maintain Buy with an unchanged PT of Rs. 165.
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