Synopsis: A number of mid-cap private lenders, including Federal Bank, RBL Bank, Bandhan Bank, and AU Small Finance Bank, have reported solid Q2FY25 results, showing strong growth in deposits, loans, and advances. Federal Bank saw a 16% YoY deposit growth, AU Bank’s CASA deposits rose 10.9% QoQ, Bandhan Bank reported 24.6% business growth, and RBL Bank recorded a 20% YoY increase in deposits. Brokerages such as Nomura, Motilal Oswal, and Jefferies have shared mixed views, with buy and hold ratings across these lenders, predicting a promising yet cautious outlook for the financial year.
Federal Bank
Federal Bank has reported a 16% year-on-year (YoY) growth in total deposits, which have reached Rs2.69 lakh crore. The bank's customer deposits, excluding interbank and certificates of deposit, also increased by 16% YoY, amounting to Rs2.53 lakh crore. CASA deposits grew by 11.5% YoY to Rs80,923 crore. Nomura commented that although Federal Bank displayed strong loan growth, the quarter-on-quarter (QoQ) deposit growth was softer. Despite this, the brokerage maintained a ‘buy’ rating with a target price of Rs240.
Nuvama Institutional Equities also praised the bank’s 5% QoQ loan growth, driven primarily by retail lending, forecasting an improvement in net interest margin (NIM) and a strong 9% core PPOP growth, with a target price of Rs160.
AU Small Finance Bank
AU Small Finance Bank’s deposits rose by 12.7% QoQ to Rs1.09 lakh crore. CASA deposits also grew sequentially by 10.9%, amounting to Rs35,000 crore. This is the first update following AU Bank’s merger with Fincare Small Finance Bank, which became effective from August 2024. Nomura expressed optimism about AU Bank’s Q2 performance but maintained a ‘neutral’ rating with a target price of Rs650.
Motilal Oswal expects AU Bank’s margins to moderate post-merger but believes the overall business growth remains robust. The brokerage has issued a ‘buy’ rating with a target price of Rs830.
Bandhan Bank
Bandhan Bank reported a total business growth of 24.6% YoY, reaching Rs2.73 lakh crore. Loans and advances increased to Rs1.30 lakh crore, and total deposits grew to Rs1.42 lakh crore. Collection efficiency across all business verticals stood at 98.2%. Jefferies noted the strong deposit growth, particularly in bulk deposits, but pointed out weaker efficiency in emerging entrepreneur business (EEB) loans. The firm maintains a ‘buy’ rating with a target price of Rs240.
Nuvama Institutional Equities highlighted that the collection efficiency (CE) for non-EEB loans improved, while CE for EEB loans remained flat at 98%. It issued a ‘hold’ rating with a target price of Rs242.
RBL Bank
RBL Bank posted strong results, with total deposits rising 20% YoY to Rs1.08 lakh crore, and gross advances growing by 15% YoY to Rs89,786 crore. CASA deposits increased by 13% YoY, amounting to Rs36,221 crore. Morgan Stanley pointed out a moderation in loan growth but noted steady deposit growth after a dip in Q1. It maintained an ‘underweight’ rating with a target price of Rs210.
Motilal Oswal warned of potential margin pressures and elevated cost ratios for RBL Bank. They forecast a moderation in earnings growth and recommended a ‘neutral’ rating with a target price of Rs250.
Disclaimer: This article is for informational purposes only and should not be construed as investment advice. Please consult a financial advisor before making investment decisions.