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News: Federal Bank reported 19.6% YoY growth in NII driven by 20.9% YoY uptick in advances. NIM declined 16 bps QoQ to 3.15%, led by increase in cost of funds. Other income grew at 61.8% YoY, driven by ~21% YoY growth in fee income and treasury income. CI ratio increased by 100 bps QoQ to 50.9% owing to 24.4% YoY growth in opex. Credit cost remained at 41 bps, flat YoY. PAT increased 42.1% YoY to Rs 854 crore, though declined 5.4% QoQ owing to muted NII growth and increase in provision.
Views: Overall performance remained on track with target of 18-20% business growth unchanged. Sequential decline of 16 bps in margins was higher than anticipated which led to pressure on stock price. However, unchanged guidance of ~3.3% in margins and ~40 bps of credit cost is seen to provide comfort. Continued growth trajectory and improvement in margin to remain watchful. In addition, bank is planning to raise capital for supporting future growth.
Impact: Neutral