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Federal Bank Q3 Review - Margin Expansion, Lower Credit Costs Aid Profitability: Systematix

Federal Bank Q3 Review - Margin Expansion, Lower Credit Costs Aid Profitability: Systematix

<div class="paragraphs"><p>Indian rupee banknotes are counted in India. (Photographer: Dhiraj Singh/Bloomberg)</p></div>
Indian rupee banknotes are counted in India. (Photographer: Dhiraj Singh/Bloomberg)

BQ Blue’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer BloombergQuint’s subscribers an opportunity to expand their understanding of companies, sectors and the economy.

Systematix Research Report

Federal Bank Ltd. posted a robust Q3 FY22 performance, with expansion in margin and strong fee income growth. Expansion in loan deposit ratio and a faster decline in funding costs led to margin expansion of 7 basis points QoQ to 327 bps, despite a relatively conservative stance on credit selection – it chose to expand corporate and secured retail credit at a faster clip compared to other banks expanding their unsecured retail, micro small and medium enterprise and loan against property credit books.

Consequently, Federal Bank’s margins seem more sustainable on a risk-adjusted basis. Its credit cost remained low at 22 bps. The customer acquisition pace remained strong with the help of Fintechs; likely to improve further.

We expect margins to expand further with credit costs at 66 bps on an average in FY23 and FY24.

Click on the attachment to read the full report:

Systematix Federal Bank Q3FY22 Result Update.pdf

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