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Federal Bank (FB)
Banks/Financial Institutions
Slippages remain high, recoveries picking up; valuations offer comfort. Federal
Bank reported an NII growth of 33% yoy and earnings growth of 39% yoy, as margins
improved further. Slippages remained high at 3.6% annualized, but strong recoveries
cushioned the NPL increase during the quarter. The new management is seeking to
improve risk management practices resulting in slower loan growth - benefit of which
should be visible in FY2012E. Valuations at 1.4XFY2012E PBR and 9.6XFY2012E PER
remain attractive, we maintain our positive outlook. Retain ADD with a TP of `530.
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