Federal Bank Ltd. share price target

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Federal Bank Ltd, is an Indian commercial bank in the private sector headquartered in Kerala having 1,272 branches and 1,941 ATM/ Recyclers with a loan book size of ~Rs1,25,505cr. Pre-provision profits grew by 29.5% YoY led by strong growth in...

Price Analysis: Federal Bank has reported 3QFY21 earnings in line with our expectations led by a) Strong NII growth (24.4% YoY) with 8bps improvement in NIMs to 3.13%, b) relatively healthy business growth with net advance and deposit growth of 5.3% YoY and 11.8% YoY respectively, c) sequentially higher C/I ratio of 49.8% v/s 46.7% in 2QFY21 and d) downtrend in reported NPA numbers with GNPA/NNPA ratio of 2.71%/0.61%. Furthermore, the bank's PAT grew by 31.4% sequentially with lower provisioning expenses (4.2bn v/s 5.9bn in the previous quarter). The Pro-forma GNPA/NNPA ratio stood at 3.38%/2.71% with PCR of 77.1%. Factoring expected 3QFY21 results and inexpensive valuation (P/BV: 1x), we maintain our positive outlook on the bank....

We believe that keypositives are increasing retail focus, strong fee income, adequate capitalisation (Tier-1 at 13.0%),and prudent provisioning. We maintain Buy with a target price of Rs 93 (1x FY23EABV).

Federal Bank's Proforma GNPA and NNPA weakens at 3.4% and 1.1% respectively as Proforma slippages stood at Rs11bn. Reported asset quality improves with GNPA at 2.71% vs 2.84% QoQ, NNPA at 0.6% vs 1% QoQ led by higher PCR (77% vs 64% QoQ). Bank expects a restructuring of Rs15-Rs16bn and 90% of coming from Moratorium book. Net interest income grew by 24% YoY led by improvement in NIMs which stood at 3.2%. Operating profit grew by 29% YoY driven by cost to income ratio (49.8% vs 52.4% YoY) while PAT decline by 8.3% YoY led by higher provision (up 161% YoY). Collection efficiency remains stable at 95% QoQ in December month. Credit growth Continues to...

Overall net advances growth was very much in-line with the industry at 5.3% YoY to | 125505 crore this was mainly driven by retail book. Wholesale book declined by 4.4% as a result of managements cautious approach on lending towards this segment. On retail front overall book saw a strong growth of 16.8% YoY at |69560 crore. While excluding Agri and Business Banking the retail growth stood at 15.6% YoY. The bank also has taken a calibrated approach in retail lending segment and has pushed for high yielding gold loans and personal loans segment. Gold loans were up by 67% YoY for the...

Pro-forma slippages of Rs8.6bn (Rs6.2bn in Q3FY21 Rs4bn excl. ILFS) is also quite under control and moving to normalized levels Federal Bank reported a marginally lower earnings of Rs4.0bn (PLe: Rs4.2bn) on higher than expected provisions. Although PPOP was quite strong growing 30% YoY (6% beat on PLe) led by a robust NII & fee income. Slippages were negligible, although on pro-forma basis slippages would have been higher by 6.2bn (Rs8.6bn for 6MFY21) which has been in-line with...

FB's operating performance remains steady, aided by healthy NII growth and recovery in core fees. Business activity is reviving gradually as reflected in the robust trends in Retail loans, led by Gold, LAP, and Housing loans. On the asset quality front, total COVID-19 related restructuring currently stands at INR10.7b (~0.9% of loans). The management expects it to increase to INR15-16b by 4QFY21. Pro-forma slippages stood at INR10.7b (including a large infra account of INR2.05b, which is likely to get resolved in 4QFY21). We fine-tune our estimates and increase our FY21E/FY22E earnings by 5%...

Federal Bank Ltd, is an Indian commercial bank in the private sector headquartered in Kerala having 1,271 branches and 1,941 ATM/ Recyclers with a loan book size of ~Rs1,22,912cr....