Federal Bank Ltd. share price target

...

Restructured book rises to ~2.5% of loans; business momentum gains traction FB reported a strong 2QFY22, with PAT up by 50% YoY to ~INR4.6b (23% beat), led by lower provisions, which declined 55% QoQ. Core fee income saw a healthy recovery and grew by 51% QoQ, led by improving business activity. Margin improved to 3.2%. The bank witnessed a pick-up in business growth as gross advances grew by ~10% YoY, led by healthy traction in Business/Commercial Banking and the Agri book. Deposit growth was stable, while the CASA ratio touched a...

We maintain a BUY rating on the stock in the backdrop of attractive valuations and value it at 1.1x FY23E ABV to arrive at a target price of Rs 100.

We maintain a BUY with a TP of Rs 100 (1.1x FY23E ABV).

While restructuring was on the higher side at ~2%, the nature of the book is secured and mostly from HL which is manageable. We maintain BUY with a TP of Rs 100 (1.1x FY23E ABV).

Federal Bank reported stable asset quality with GNPA at 3.50% vs 3.41% QoQ (vs 2.96% YoY) and NNPA at 1.2 vs 1.2% QoQ (1.2% YoY) led by recovery from kingfisher account and higher write off. Covid Specific Restructuring assets saw uptick at Rs8.5bn in Q1FY22 by retail and gold loans (Rs6.5bn) and expects Rs4bn in Q2FY22; overall it stands at 1.8% vs 1% earlier. Stressed book % of assets which was declining for last 3 years spiked to 2.24% vs 1.76% QoQ. Due to Second covid wave, Credit growth slowdown to 7% YoY vs 9% YoY (FY21); Deposits growth stood at 9% YoY vs 13% YoY (FY21). Net interest income growth slowdown to 9% YoY (17% YoY growth Q4FY21) led by declined in NIMs. Operating profit grew by 22% YoY driven by lower cost...

...

watched as the covid provision (0.37% of book) seems inadequate. Furthermore the management expects 30% - 40% of restructured book may likely slip in coming quarters. However, major chunk of restructured book is secured. GNPA is at 3.50% v/s 3.41% in the previous quarter. Gold loan growth (54% YoY) and robust other income growth (40% QoQ) are positive take ways from this quarter. We believe, the growth will come back post capital infusion. Nevertheless, the movement of restructured book will be key monitor-able. Factoring capital raise, stable quarter and inexpensive valuation (P/BV: 1x), we maintain our positive outlook on Federal Bank. Capital infusion to propel growth: The board of Federal Bank has approved the capital raising...

Federal Bank earnings of Rs3.67bn (PLe: Rs4.64bn) was a large miss on back of 2x provisions than expected as slippages were high at Rs6.4bn and additonal restructuring of Rs8.5bn. Opeartionally, despite slower NII it has been able to demonstrate strong core PPOP growth of 40% YoY led by cost efficiencies. Although, H1FY22 will be cautious on asset quality we expect...

RBI has approved the re-appointment of Mr. Shyam Srinivasan as MD and CEO for a period of three years, starting from 23rd Sep'21 till 22nd Sep'24. We see this as a positive development as it addresses a key overhang on the management continuity. Moreover the approval for three years has come at a time when the street was expecting RBI to grant only a one-year extension. On the asset quality front, the initial impact of COVID-19 was in check as FB has no big ticket accounts (over INR1b) in its watch list. The restructuring book stood at INR14b (1.1% of loans). Also, total slippages stood at 1.4% of loans in FY21, similar to...