Federal Bank Ltd. share price target

Operating performance of Federal Bank (FB) was higher than expectations on account of higher treasury gains. Loan growth moderated to 11% YoY, led by sluggish growth in corporate/SME, while retail loans grew 19% YoY.

Federal Bank reported a mixed set of Q4FY20 numbers wherein the operational performance was healthy due to other income one offs but a surge in provisioning dented PAT growth. As on May 25, 2020, 35% of borrowers by value opted for the moratorium with retail customers comprising a majority. Total provisioning for the quarter was at | 567 crore (~46 bps of advances), which includes Covid-19 provisioning of | 93 crore (RBI requirement of | 30.3 crore). The bank has reported Covid-19 impact on loss of revenues and recoveries to the extent...

FB posted a largely in-line set of earnings at Rs3.0bn (PLe: Rs2.82bn) and core PPOP of Rs5.9bn (PLe: Rs6.1bn). Overall PPOP was boosted by strong trading profits and used it to make higher provisions for overdue accounts, COVID impact on certain sectors and improve PCR with benefit of lower slippages from moratorium standstill. Bank also had to provide acturial employee benefits of Rs1.2bn owing to drop in yields. Adjusting to COVID, core performance would have been undeterred but seems slippgaes run rate...

Federal Bank (FB) posted strong results for Q4FY2020 with in-line topline growth, but treasury gains helped offset the steep rise in provisions. In addition, sequentially improved asset quality (GNPAs down by 8BPS) is a positive. During the quarter, FB saw NII of Rs. 1,216 crore, up 10.9% y-o-y, which was in line with expectations. However, non-interest income grew to Rs. 711 crore, up 72.7% y-o-y, driven by higher investment/treasury gains of Rs. 369 crore in Q4FY2020 (was Rs. 65 crore in Q3). Higher other income (OI) partially helped cushion the impact of the steep rise in provisions, which at Rs. 567 crore (including COVID-19 related...

Federal Bank's (FB) Q4 PAT declined 21% YoY to Rs 3bn given higher credit-, Covid- and wage-related provisions, partly cushioned by treasury gains.

The COVID-19led lockdown is a significant event impacting the Indian as well as the global economy. The resultant lockdown is expected to cause simultaneous weakening of consumer demand and a slowdown across sectors. Initial signs indicate that the Coronavirus outbreak may result in higher delinquencies and lower credit offtake for banking, financial services and insurance (BFSI) companies, including Federal Bank.Federal Bank has a 51% wholesale book, mainly comprising business banking and SME/MSME segment which are expected to see COVID-19 related impact on their business and cash-flows. Hence we expect Federal Bank's...

Federal Bank Ltd is a Indian commercial bank in the private sector headquartered in Kerala having 1,276 branches and 1,937 ATM/ Recyclers and a loan book size of ~Rs1,20,862cr. Due to Covid 19 pandemic we expect banks advances to fall by 4% in FY21E and recover in FY22E compared to previous estimates. Low interest rate regime and fall in credit growth could hurt NIM in Q1FY21. However, bank's plan to increase its ROA to 1.25% by...

Attractive valuations underpin our stance our BUY rating with a TP of Rs 112 (1.3x FY22E ABV). The continuation of the incumbent CEO is a monitorable. At FBs recent analyst day, like with most banks, the focus was on technology, growth (in high yielding segments) and the way for RoAA improvement. Certain aspects of the strategy and guidance presented appear achievable. We too continue to expect an improvement in return ratios at the bank (albeit slower vs. guidance).

At its 2020 Analyst Day, Federal Bank (FB) provided updates on the operations/business segments and ROA roadmap for next 2-3 years. Segments covered included Wholesale Banking, Credit Risk Management, Treasury, Transaction Banking, Credit Underwriting, Retail among others.

26 February 2020 FB has been looking for sustainable loan growth with a strong focus on growing the retail book at 25% YoY while consciously slowing down in the wholesale segment due to the current challenging environment. It reiterated that there is no residual stress in corporate accounts above INR1b, mainly led by the higher focus on working capital loans and cash flow-based lending, which resulted in lower stress on the incremental portfolio. Further, the bank expects the mid-corporate segment to grow at a higher pace compared to large corporate lending. Federal Bank FB has reported a sharp decline in net stressed loans to ~1.6% of average assets from 3.4% in FY15. It thus expects corporate slippages to moderate significantly and cash recovery trends to remain strong. Also, retail/agri/business banking trends are improving for last few quarters, and thus NPAs in retail assets have improved to 1.8% from 2.