Federal Bank Ltd. share price target

Post underperformance in FY18, Federal Bank (FB) reported a good come-back quarter in Q1FY19, with PAT at Rs 262.7cr (up 25/81% YoY/QoQ). Profitability was primarily driven by strong NII growth (up 22% YoY), as margins held up.

NII rose to Rs. 980.06 Cr in Q1FY19 compared to Rs. 933.22 Cr in Q4FY18. Federal Bank Ltd Q1FY19 results Comment

Federal Bank, for Q1FY19, reported decent set of numbers with net interest income growing 22.4% YoY. Pre-provisioning profit grew at a slower pace of 8.1% due to 118bps YoY increase in cost-income ratio (CI%) at 51.8% vs. 50.6% in the corresponding quarter last year. Net profit grew 25.0% to Rs263 crore led by a 15.8% decline in provisions & contingencies. Asset quality, at the end of the quarter, remained stable with gross non-performing assets (NPAs) unchanged at 3.00%. Net NPA increased 3bps QoQ to 1.72%, on lower provisioning. View: Post FY18, the stock of Federal Bank had corrected ~11% (since our last...

Maintain NEUTRAL with a TP of Rs 103 (1.5x FY20E ABV of Rs 69). After several asset quality stumbles, FBs 2% slippage in 1QFY19 was a mild surprise. Higher write-offs capped GNPAs at 3%, even as slippage was not exactly inspiring (incl. relapse of ~Rs 1.63bn). Other metrics were heartening (book growth +23.6% YoY, stable NIMs at 3.12% and opex down ~2% QoQ, despite the one time gratuity hit of Rs 536mn). Ex-tax provisions fell 46.4% QoQ as FB utilised RBIs relaxation on MTM provisioning (deferred a hit of Rs 442mn) and incurred lower credit cost, leading to a massive 43% earnings beat.

Federal Bank has delivered a healthy performance on all major metrics in 1QFY19 led by, (a) healthy NII growth (+22.5% YoY +5% QoQ); (b) strong growth in loan book to Rs943bn (+23.6% YoY and 2.5% QoQ); (c) QoQ improvement in C/I ratio to 51.8% vs. 52.8% in 4QFY18; (d) lower fresh slippages of Rs4.6bn vs. Rs8.7bn in 4QFY18 and (d) highest ever upgrade and recovery of Rs2.5bn vs. Rs2.4bn in 4QFY18 and Rs980mn in 1QFY18. The Bank's overall stress assets book...

ICICI Securities Ltd | Retail Equity Research Absolute slippages moderated from | 872 crore and were at | 461 crore coming back to the ~| 400 crore trend seen in the past. Also, | 163 crore slippages from standard restructured book led to corporate slippages of | 207 crore. FY18 GNPA was at | 2868 crore vs. | 2796 crore QoQ. GNPA ratio was stable at 3%. NNPA ratio rose to 1.72% Owing to relatively better asset quality, provisions declined significantly from | 372 crore to | 199 crore in Q1FY19. Lower...

Interest income grew by 15% and reflected 22% growth in NII led by strong loan growth coupled with stable NIM PAT increased by strong 25% in Q1FY19 due to lower provisioning YoY. Stable GNPA ratio at 3%/ and NNPA ratio slightly increased by 3bps to 1.72% in Q1FY19 against 1.69% in Q4FY18. Loan book grew by 24% YoY with the strong growth across Retail, SME and Corporate segments, while deposits grew by 16% YoY....

Federal Bank reported a strong quarter in 1QFY19, with PAT at INR 2.63bn (+8% above JMFe). The beat in net profit was primarily driven by strong NII growth (+22% YoY), as margins held up for FB. Credit cost was contained at 80bps for FB in 1QFY19, as slippages almost halved sequentially to 2.3% (annualised). Net stress on FB's loan book (net NPA + other stress) is now at 2% of loans (from 2.3% as of 4QFY18). Management remains confident of containing slippages at INR 11-12bn in FY19E, with credit costs in the range of 65-70bps. Furthermore, FB is positive on its margin outlook, and expects this, along with the containment of credit cost will help it deliver 1% exit RoA by 4QFY19. We remain cautious...

17 July 2018 FB reported PPoP growth of 2.4%/8.1% QoQ/YoY to INR6b (in-line), as the 3%beat on NII (+5%/+22% QoQ/YoY to INR9.8b) was offset by the other income (-14%/-18% QoQ/YoY to INR2.7b). Lower-than-expected provisions of INR1.9b (-46%/-16% QoQ/YoY) led to PAT of INR2.6b (5% beat). NIM was flat at 3.12% (+1bp QoQ). Yields declined marginally (-2bp) to 9.11%, while cost of deposits declined to 5.64% (-12bp QoQ). Loan growth of 2.5%/24% QoQ/YoY was led by 31% YoY growth in corporate book, while retail and SME loans also maintained healthy traction (+19%/+17% YoY).

Downgrade to NEUTRAL. Our target multiple is cut to 1.5x on FY20E ABV of Rs 68, leading to a TP of Rs 102. Repeated slips in asset quality (often at variance with commentary and initiatives) force us to downgrade FB. Slippages doubled QoQ (~Rs 8.9bn) as the RBI circular led to an accretion of ~Rs 4.5bn. While loan growth (+25% YoY in 4QFY18) was laudable, core earnings were dented (~5% miss) by interest reversals. Moderately higher opex (despite gratuity), robust core fees (+18% QoQ) and steady CASA helped, but only a bit, as profits fell 44% YoY.