Brokerage firm Anand Rathi has shared its views on three banking stocks—IDFC First Bank, Federal Bank, and Indian Bank—after they reported their Q2 earnings.
As of 11:28 AM, shares of IDFC First Bank were trading 0.60% lower at Rs 66.71 on the Bombay Stock Exchange (BSE), while Federal Bank saw a notable increase of 6.85%, reaching Rs 197.35, and Indian Bank climbed 2.99% to Rs 567.45.
IDFC First Bank reported healthy growth in Q2; however, increased provisioning costs resulted in a significant 73% year-on-year decline in profit after tax (PAT). In response to higher credit costs and lower growth estimates, Anand Rathi has revised their FY25 and FY26 earnings forecasts downwards.
The bank demonstrated strong performance in both advances and deposits. Advances grew by 23% year-on-year and 6.2% quarter-on-quarter, with retail lending—particularly in housing and consumer segments—growing rapidly.
Federal Bank has reported steady operating profits with moderate provisioning, leading to a return on assets (RoA) of 1.28%, a slight increase from the previous quarter. The bank's balance sheet showed strong growth, with stable headline asset quality.
The retail segment experienced lower slippages, and the standard restructured book fell by 10% quarter-on-quarter to Rs 16.4 billion, representing 0.7% of loans, with approximately 15% coverage.
Indian Bank reported improved operating performance with a RoA increase of 13 basis points quarter-on-quarter to 1.33%. The bank's asset quality continues to show signs of improvement, with a decline in both gross non-performing assets (GNPA) and net non-performing assets (NNPA).
Slippages for Q2 FY25 were recorded at Rs 14.5 billion (1.1% of loans), with significantly better performance in the retail and SME segments. The standard restructured book decreased to Rs 71.4 billion, or approximately 1.3% of loans, further indicating improving asset quality.