Federal Bank Q2 Review - Earnings Outlook Strengthened: Motilal Oswal
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Motilal Oswal Report
Federal Bank Ltd. reported a strong Q2 FY22, with PAT up by 50% YoY to ~Rs 4.6 billion (23% beat), led by lower provisions, which declined 55% QoQ.
Core fee income saw a healthy recovery and grew by 51% QoQ, led by improving business activity. Margin improved to 3.2%.
The bank witnessed a pick-up in business growth as gross advances grew by ~10% YoY, led by healthy traction in business/commercial banking and the agri book. Deposit growth was stable, while the CASA ratio touched a record high of ~36.2%. The retail deposit share rose to 94%.
On the asset quality front, slippages moderated meaningfully to Rs 3.2 billion (~1% of loans), which, coupled with healthy recoveries/upgrades, resulted in an improvement in asset quality ratios. PCR remains stable ~66% (the highest among mid-size banks). The restructured book increased to ~2.5% of loans (v/s 1.9% in Q1 FY22). Collection efficiency was stable at 96%.
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