Federal Bank Ltd. share price target

Weak core operating performance; asset quality bites again Federal Bank (FB) reported a net profit of INR103m (-96% YoY; 95% miss), led by significantly higher credit costs (~2% of loans, annualized vs. 0.75% in...

Federal Bank?s (FB) asset quality slipped further in 3QFY16, driven by the corporate segment, as it recognised two steel and one shipping AC as NPAs. We think FB is now aligned with the regulator on stress recognition. Opex growth (13% YoY) and the 500bps QoQ dip in PCR also hit performance.

Federal Bank reported a weak set of numbers for 3QFY2016. Its NII grew 3.1% yoy while profit declined on a yoy basis on account of decrease in non-interest income as well as higher provisions. Slippages at peak; NIM falls qoq During 3QFY2016, the bank witnessed a loan growth of 9.8% yoy, while deposits grew by 14.1% yoy. Growth in advances was led by the Corporate and SME books, which grew by 19.4% and 17.1% yoy, respectively, while the growth in the retail loan book was lower at 6.9% yoy. CASA deposits, with a growth of 20.1% yoy, outpaced deposit growth, led by growth in both the current and savings deposits. As a result, the CASA ratio improved by 161bp yoy to 32.1%. The Reported NIM fell by 7bp qoq to 3.04%, due to interest reversal on account of higher slippages and base rate cut by the bank. Other income (excluding treasury) growth was moderate as the quarter saw some softness in forex income, while core fee income remained stable. Treasury gains during the quarter came in much lower at `23cr as against `77cr in 3QFY2015. On the asset quality front, the annualized slippage ratio was higher at 4.5% as compared...

Federal Bank's 3QFY16 result was way below our and street estimates due to sharp increase in fresh slippages during the quarter along with substantial increase in C/I ratio. Total fresh slippages in 3QFY16 stood at Rs5.7bn (slippage ratio of 4.5%) v/s Rs4.1bn in 2QFY16 and Rs2.3bn in 3QFY15. Higher slippages were owing to the increased slippages from SME and corporate loan portfolios. Provision coverage ratio also deteriorated to 48% v/s 55% in 2QFY16 and 68.8% in 3QFY15 due to considerably higher slippages coupled with lower provision. Business growth remained subdued as loan grew by mere 2.9% YTD and 9.8% yoy. As a result,...

Federal Bank's 2QFY16 result was way below our and street estimates due to sharp increase in fresh slippages during the quarter along with substantial increase in C/I ratio. Total fresh slippages in 2QFY16 stood at Rs4.1bn (slippage ratio of 3.3%) v/s Rs3.2bn in 1QFY16 and Rs1.8bn in 2QFY15. Higher slippages were owing to the increased slippages from SME and corporate loan portfolio. C/I ratio also deteriorated to 57.4% v/s 54% in 1QFY16 and 48.9% in 2QFY15 due to considerably higher growth in opex as compared to operating income. Business growth remained subdued on YTD basis owing to decline in corporate and agri...

Federal banks (FB) results were disappointing with (a) A sharp rise in slippages to Rs 3.2bn - 2.5% ann

Federal banks (FB) results were disappointing with (a) A sharp rise in slippages to Rs 3.2bn; 2.5% ann., led by one large corporate account, (b) Net earnings at Rs 1.4bn; down ~36% YoY and 41% below estimates due to higher investment provisions of Rs 490mn and credit cost of Rs 1.2bn and (c) Muted loan growth of 10% owing to a paltry 3% growth in corporate book and a sharp 16% YoY decline in retail gold loans.

Federal Bank's Q1FY16 results were sharply below estimates as the earnings declined by 35.8% YoY (49.6% QoQ) to Rs 1.4 bn led by sharp jump in provision expenses. NII was in line with estimates as it grew by 7.2% YoY (3% QoQ decline) to Rs 6.0 bn. Advances growth was weak at 10.1% YoY (-3.4% QoQ) led by QoQ decline in corporate, agri and retail advances. NIMs also dipped by 19 bps QoQ to 3.12%. Asset quality nose-dived as GNPA and NNPA increased to 2.59% and 0.98% from 2.04% and 0.73% in Q4FY15.

Federal banks (FB) results were mixed bag. Adjusted for interest on tax refund, NII were below estimates due to NIM compression (-10bps QoQ). On positive front, growth trend seems to be improving (18% YoY) coupled with stable asset quality. Other key highlights were traction in fee income 17% YoY, stable CASA at ~30% and improvement in rating matrix of the assets.