Federal Bank (FB IN, CMP: `427; TP: `463; Outperform)
• We expect margins to be flattish on a sequential basis. Low-cost deposits are expected to grow at 25% YoY, which would help in supporting margins.
• We expect loan growth to be at 7.5% YoY primarily due to high base effect, and 22% for the whole year. Deposit growth is expected at 3.6% YoY lower than loan growth suggesting that excess liquidity in the balance sheet will fade off.
• We expect slippages to be sequentially lower and GNPAs to sustain at 1QFY11 levels.
• NPA provision charges are expected to be sequentially lower at `1.1bn vs `1.3bn in 1QFY11E
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