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Technical Outlook

• The banking sector has been spearheading the ongoing bull run, we expect it to continue its outperformance as the Bank Nifty has recently generated a breakout above its 14 months range. Federal Bank is our top pick among midcap banking stocks

• The stock has recently generated a resolute breakout above its last five years range (| 127-36) as it resolved above CY17 highs (| 127) signalling a start of a new bull phase

• We expect thrust from the recent breakout to lead the share price to | 168 in coming quarters as it is the price parity with the previous up move (| 84-129) as projected from September 2022 low of | 109

 Fundamental Outlook

• Federal Bank is an old private sector bank based out of Kerala with 1305 branches and 1876 ATM across various states. Federal bank has 1.24% market share in advances with balanced loan mix between retail: wholesale of 54:46

• Robust credit growth in high teens (15-17% CAGR in FY23-24E) and deposits growth in early teens to aid business momentum. Partnerships with fintechs to strengthen liabilities base

• Effective transmission of rate hikes, lower incremental slippages and focus on high yielding products (CV/CE, micro, credit cards & personal loans) to aid margins expected at 3.2-3.3% in FY23-24E

• Sustainable business growth, steady margins and credit cost at <1% to enable healthy RoA of ~1.25% in FY23-24E. Hence, we remain positive on the stock

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