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Federal Bank results were inline with expectation as we expected loan book to
pick up and consolidation phase to end. Reported Net interest income was ahead
of expectation at Rs 6.1 bn, up 11% yoy, however adjusted for one time income of
Rs 270 mn, it was inline with expectation of Rs 5.8 bn. Operating profit was ahead
of expectation led by higher other income, up 37% yoy and partly due to one off
income. However adjusted for one time income, it was inline with expectation at
Rs 3.8 bn. Asset quality remain healthy with decline of 12 / 2 bps qoq in Gross /
Net NPA to 2.1% / 0.66%. Fresh slippages were at Rs 1.8 bn (no NPA sold to ARC in
Q2FY15) lower than Rs 2.2 bn (Rs 1830 mn + Rs 410 mn sold to ARC) in Q1FY15.
Reported Net profit at Rs 2.4 bn was ahead of expectation led by reasons
mentioned above, adjusted for same, it was slightly lower than expectation at Rs
2.1 bn. Valuations looks reasonable at 1.4x FY16E ABV, upgrade to buy with revised
target price of Rs 153, valuing at 1.6x FY16E ABV.
Result highlights
Loan growth picked up, inline with expectation:
Federal bank’s Gross Advances grew by 14% yoy to Rs 491 bn led by pick up in
growth across all segments. SME segment grew by 26% yoy to Rs 118 bn, Retail
segment grew by 16% yoy to Rs 154 bn and Agri by 25% yoy to Rs 57.5 bn. Corporate
segment has picked up and shown a growth on qoq by 8% to Rs 161 bn and this
growth has majorly come from working capital loans. 56% of fresh credit
disbursement in corporate segment was working capital and remaining is term loans.
Mortgage and Home loans remain the key driver of retail book and grew by 62%
yoy (13% qoq) and 19% yoy (4% qoq).
LINK
http://www.indianivesh.in/Admin/Upload/635491344334072500_Federal%20Bank_Q2FY15%20Result%20Update.pdf
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