Federal Bank Q1 Review - Asset Quality Broadly Stable; Earnings Outlook Strengthening: Motilal Oswal
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Motilal Oswal Report
Federal Bank Ltd. reported a profit after tax of ~Rs 3.7 billion in Q1 FY22, led by strong other income (recovery from a written-off accounts and treasury gains of Rs 2.6 billion).
It prudently deployed these gains towards provisions, which stood elevated at Rs 6.4 billion (63% YoY increase), to further strengthen its balance sheet.
Federal Bank posted a moderation in business growth, with loans across most segments declining sequentially.
Deposit growth was muted, while the current account and savings account ratio touched ~35% (record high levels).
On the asset quality front, higher disruption due to the second Covid-19 wave caused elevated slippages of Rs 6.4 billion (annualised ~2% of loans), though higher write-offs led to stable asset quality ratios.
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