Buy Federal Bank : Robust sequential loan growth; deposits traction too healthy QoQ - Motilal Oswal Financial Services
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Federal Bank (FB) released a quarterly update emphasizing its 2QFY23 business numbers. Here are the key highlights:
* Gross advances grew strongly at ~19.4% YoY to ~INR1.64t and also reported a robust sequential growth of 6.2% (v/s 4.6% QoQ in 1QFY23).
* According to the internal classification of the bank, retail credit grew 18.7% YoY while wholesale book posted a strong growth of 20.2% YoY. With this, the share of retail in total loan mix stood at 54% in 2QFY23.
* Total deposit base grew 10% YoY (3.2% QoQ) to INR1.89t. Total customer deposits rose 8.5% YoY (2% QoQ) while CASA grew at 10.7% YoY (2% QoQ). As a result, CASA ratio declined 42bp QoQ to 36.41%. Growth in term deposit came in at 7.2% YoY and 2% QoQ (v/s 1.1% QoQ in 1QFY23).
* Certificate of deposit grew 117% YoY while interbank deposits rose 40.1% YoY.
* CD ratio for the bank thus improved ~250bp QoQ to 86.7% v/s 84.2% in 1QFY23 and 79.8% in 2QFY22.
* Overall, FB posted a robust growth in advances, aided by a strong growth at the system level. Traction in deposits was encouraging given a stiff competition among banks to garner incremental deposits. CASA trends remained stable with a marginal decline to 36.4%, which coupled with an improving loan growth and CD ratio should aid margins.
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