Federal Bank On the right track ACCUMULATE : Emkay

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Federal Bank

On the right track

ACCUMULATE

CMP: Rs 384                                       Target Price: Rs 425

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n     FB Q2FY12 NII came inline with expectation at Rs4.7bn, however net profit at Rs1.9bn was above expectation led by lower provisioning inline with improvement in asset quality

n     NII grew by 8.2%yoy to Rs4.7bn led by 21.6% yoy (5.1% qoq) growth in loan book, albeit NIM’s contracted by 10bps qoq to 3.4%

n     Slippages down from Rs3.2bn in Q1FY12 to 2.6bn in Q2FY12. Further aided by higher recovery/ upgradation (63% of NPA), GNPA ratio improved from 3.9% in Q1FY12 to 3.6% in Q2FY12

n     Improvement in asset quality and pick up in balance sheet growth vindicates our view on the bank. Maintain ACCUMULATE with TP of Rs425