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Federal Bank
For 2QFY2012, Federal Bank recorded strong net profit growth of 36.2% yoy (up
30.8% qoq), above our estimates, mostly due to lower provisioning expenses than
built in by us. The bank’s asset quality improved significantly during the quarter,
with slippages reducing by `58cr qoq and credit cost improving by 46bp qoq.
For 2QFY2012, advances and deposits registered strong growth. Advances grew
by 21.6% yoy (up 5.1% qoq) to `33,607cr and deposits grew by 30.9% yoy (up
10.1% qoq) to `47,263cr. CASA deposits grew by a less impressive 14.5% yoy
compared to deposit growth, leading to CASA ratio shrinking by 367bp yoy (down
151bp qoq) to 25.7%. Including NRE deposits, total low-cost deposits constituted
31.3% of total deposits (32.8% in 1QFY2012). A major portion of the bank’s loan
book is on a floating basis, which led to a sharp rise of 76bp qoq in yield in
advances to 12.7% in 2QFY2012. However, cost of deposits also rose by 42bp
qoq, leading to a sequential 10bp decline in reported NIM to 3.8%. During
2QFY2012, non-interest income remained flat sequentially (down 18.8% yoy) at
`117cr. CEB income came in at `31cr (flat qoq), however recoveries continued to
be weak at `14cr, declining by 41.4% qoq. Asset quality of the bank witnessed a
significant improvement in 2QFY2012, with gross NPA ratio declining by 33bp
qoq to 3.6% and net NPA ratio declining by 16bp qoq to 0.6%. Slippages for
2QFY2012 reduced by `58cr sequentially to `265cr (annualised slippage ratio at
3.3%). The bank had witnessed higher retail slippages in 1QFY2012 due to oneoff
employee-related issues.
At the CMP, the stock is trading at 1.0x FY2013E ABV. While lower leverage is
leading to low RoE at present, the bank’s core RoA is relatively high. We
recommend Buy on the stock with a target price of `444.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Federal Bank
For 2QFY2012, Federal Bank recorded strong net profit growth of 36.2% yoy (up
30.8% qoq), above our estimates, mostly due to lower provisioning expenses than
built in by us. The bank’s asset quality improved significantly during the quarter,
with slippages reducing by `58cr qoq and credit cost improving by 46bp qoq.
For 2QFY2012, advances and deposits registered strong growth. Advances grew
by 21.6% yoy (up 5.1% qoq) to `33,607cr and deposits grew by 30.9% yoy (up
10.1% qoq) to `47,263cr. CASA deposits grew by a less impressive 14.5% yoy
compared to deposit growth, leading to CASA ratio shrinking by 367bp yoy (down
151bp qoq) to 25.7%. Including NRE deposits, total low-cost deposits constituted
31.3% of total deposits (32.8% in 1QFY2012). A major portion of the bank’s loan
book is on a floating basis, which led to a sharp rise of 76bp qoq in yield in
advances to 12.7% in 2QFY2012. However, cost of deposits also rose by 42bp
qoq, leading to a sequential 10bp decline in reported NIM to 3.8%. During
2QFY2012, non-interest income remained flat sequentially (down 18.8% yoy) at
`117cr. CEB income came in at `31cr (flat qoq), however recoveries continued to
be weak at `14cr, declining by 41.4% qoq. Asset quality of the bank witnessed a
significant improvement in 2QFY2012, with gross NPA ratio declining by 33bp
qoq to 3.6% and net NPA ratio declining by 16bp qoq to 0.6%. Slippages for
2QFY2012 reduced by `58cr sequentially to `265cr (annualised slippage ratio at
3.3%). The bank had witnessed higher retail slippages in 1QFY2012 due to oneoff
employee-related issues.
At the CMP, the stock is trading at 1.0x FY2013E ABV. While lower leverage is
leading to low RoE at present, the bank’s core RoA is relatively high. We
recommend Buy on the stock with a target price of `444.
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