Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Federal Bank’s earnings were below our expectation with PBT de-growing by 5% due
to slower growth in business and rise in expenses and provision. PAT growth was
better at 30% due the impact of tax demand last year. The asset quality slipped
further as expected. The margins however remained healthy above 4%.
Q3FY11 result highlights
Business Consolidation with Brighter Outlook: The advances growth continued to be
slow for consecutive quarter and at gross level the YTD growth stood at 5.5%. The
bank has been going slow with deposit growth since the beginning of the year (YTD
+2.4%).
Such growth was being pursued with margins on mind while the new management is
working on streamlining the processes for implementation of effective risk
management and other operations. The management is very positive about the
initiatives its taking and going forward in FY12 the bank is expecting to clock a credit
growth of 20%+ mainly on the back of SME sector with home and gold loan in retail
sector.
Margin Remained High – Despite the rising rates, Federal Bank managed to maintain
its NIM at 4.28% as the cost remained nearly stable from past three quarters while
yields improved. However the pressure will be felt as the rates rise further and
deposits will re-price.
Asset Quality Deteriorates as Guided: Continuing from the first quarter the asset
quality slipped further in Q3 with GNPA at 3.84%, but it is in line with management
guidance earlier that the declining trend will be visible only from FY12. The
management expects the strain to continue to for 1-2 quarters more. The provision
coverage (without technical w/off) was maintained at 80%.
CASA Stable – The CASA has been maintained sequentially at 29.6% while the low
cost deposit (including NRE deposits) has also been stable at above 35%.
Efficiency Hit – With subdued growth in core income and other income and rise in
cost, the cost to income rose from 34% to 37% sequentially. The employee cost for
the quarter rose by 37% YoY as in last year accounting of provision related to
increase in salary, pension etc was done under provisions while this year it has been
shifted to employee expense.
Valuations – Federal bank has a strong base in Southern India with strong financials.
Over the last one year or more the bank’s growth has been extremely subdued with
some miscalculated moves. However we expect that the ongoing fortification and
streamlining initiatives by management can bring it back on track for a good growth
path. However the process may take some time and we reduce our earnings
estimates marginally for FY11E and FY12E by 2% and 4% respectively and bring down
our target price to Rs 472 (earlier Rs 505).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Federal Bank’s earnings were below our expectation with PBT de-growing by 5% due
to slower growth in business and rise in expenses and provision. PAT growth was
better at 30% due the impact of tax demand last year. The asset quality slipped
further as expected. The margins however remained healthy above 4%.
Q3FY11 result highlights
Business Consolidation with Brighter Outlook: The advances growth continued to be
slow for consecutive quarter and at gross level the YTD growth stood at 5.5%. The
bank has been going slow with deposit growth since the beginning of the year (YTD
+2.4%).
Such growth was being pursued with margins on mind while the new management is
working on streamlining the processes for implementation of effective risk
management and other operations. The management is very positive about the
initiatives its taking and going forward in FY12 the bank is expecting to clock a credit
growth of 20%+ mainly on the back of SME sector with home and gold loan in retail
sector.
Margin Remained High – Despite the rising rates, Federal Bank managed to maintain
its NIM at 4.28% as the cost remained nearly stable from past three quarters while
yields improved. However the pressure will be felt as the rates rise further and
deposits will re-price.
Asset Quality Deteriorates as Guided: Continuing from the first quarter the asset
quality slipped further in Q3 with GNPA at 3.84%, but it is in line with management
guidance earlier that the declining trend will be visible only from FY12. The
management expects the strain to continue to for 1-2 quarters more. The provision
coverage (without technical w/off) was maintained at 80%.
CASA Stable – The CASA has been maintained sequentially at 29.6% while the low
cost deposit (including NRE deposits) has also been stable at above 35%.
Efficiency Hit – With subdued growth in core income and other income and rise in
cost, the cost to income rose from 34% to 37% sequentially. The employee cost for
the quarter rose by 37% YoY as in last year accounting of provision related to
increase in salary, pension etc was done under provisions while this year it has been
shifted to employee expense.
Valuations – Federal bank has a strong base in Southern India with strong financials.
Over the last one year or more the bank’s growth has been extremely subdued with
some miscalculated moves. However we expect that the ongoing fortification and
streamlining initiatives by management can bring it back on track for a good growth
path. However the process may take some time and we reduce our earnings
estimates marginally for FY11E and FY12E by 2% and 4% respectively and bring down
our target price to Rs 472 (earlier Rs 505).
No comments:
Post a Comment