Motilal Oswal On Federal Bank: Strong Q2 Operating Performance; Collection Efficiency Back To Pre-Covid Levels
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Motilal Oswal Report
The Federal Bank Ltd. posted strong Q2 FY21 operating performance on healthy net interest income growth aided by:
Recovery in core fees
Improvement in provisioning coverage
Higher provisions toward Covid-19 though affected profit after tax. Overall, the bank holds approximately 50 basis point provisions toward the Covid-19 impact.
Provision coverage ratio has improved to 66% and the bank expects restructuring of up to 3% of loans as collection efficiency improved to 95% for September.
We have fine-tuned our estimates for FY21 and increased it for FY22E by approximately 10% owing to an increase in our margin and credit cost estimates.
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