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Federal Bank
Federal Bank posted net profit growth 29.8% yoy, led by 17.4% yoy NII growth. The
bank consolidated its balance sheet, with growth of 8.5% yoy in advances and 6.7% in
deposits.
Focus area of the new management:
a) The management took the conscious effort of reducing Cost of Deposit (yoy) by reducing
High Value & Bulk deposit and increasing low cost CASA deposits increased. The
CASA deposits grew 21.4% yoy and the effective Cost of Deposit came down.
b) The bank focused on recovery and slippages management and during FY2012E the
focus would be on loan book growth. The management expects the business growth to
pick up in FY2012E by strengthening the business processes.
c) Technology improvement for fee income growth and risk management
d) Centralized credit risk management (for efficient portfolio management, collection
and recovery mechanism)
Growing CASA to boost NIMs:
The major focus area of the bank is likely to be CASA growth so as to reduce the high
cost burden. The NIMs of the for 3QFY11 remain strong at 4.3% and CASA stands at
29%. The declining Cost of Funds with rising CASA will help in maintaining NIMs at
~3.75% levels. The Bank has received approval from RBI for opening 60 more branches
in Tier I & Tier II centres, majority of which will be located outside Kerala
Ample provisioning, sufficient capital to boost loan growth:
The Bank’s Gross NPA stood at 3.9% and Net NPA at 0.8 % for 3QFY11 with provisions
coverage ratio of 79%. The CAR for the bank stands at 16.42 % with Tier I (core
CRAR) capital at 15.20 %.
Valuation: At the current market price of `379, the bank is trading at P/BV of 1.2x
FY2011E BV of `304 and 1.1x FY2012E BV of `346.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Federal Bank
Federal Bank posted net profit growth 29.8% yoy, led by 17.4% yoy NII growth. The
bank consolidated its balance sheet, with growth of 8.5% yoy in advances and 6.7% in
deposits.
Focus area of the new management:
a) The management took the conscious effort of reducing Cost of Deposit (yoy) by reducing
High Value & Bulk deposit and increasing low cost CASA deposits increased. The
CASA deposits grew 21.4% yoy and the effective Cost of Deposit came down.
b) The bank focused on recovery and slippages management and during FY2012E the
focus would be on loan book growth. The management expects the business growth to
pick up in FY2012E by strengthening the business processes.
c) Technology improvement for fee income growth and risk management
d) Centralized credit risk management (for efficient portfolio management, collection
and recovery mechanism)
Growing CASA to boost NIMs:
The major focus area of the bank is likely to be CASA growth so as to reduce the high
cost burden. The NIMs of the for 3QFY11 remain strong at 4.3% and CASA stands at
29%. The declining Cost of Funds with rising CASA will help in maintaining NIMs at
~3.75% levels. The Bank has received approval from RBI for opening 60 more branches
in Tier I & Tier II centres, majority of which will be located outside Kerala
Ample provisioning, sufficient capital to boost loan growth:
The Bank’s Gross NPA stood at 3.9% and Net NPA at 0.8 % for 3QFY11 with provisions
coverage ratio of 79%. The CAR for the bank stands at 16.42 % with Tier I (core
CRAR) capital at 15.20 %.
Valuation: At the current market price of `379, the bank is trading at P/BV of 1.2x
FY2011E BV of `304 and 1.1x FY2012E BV of `346.
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