Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
Federal Bank
Q uarter of consolidation
Event: Results below expectations
Q1FY12 net profit at Rs1.46bn (+11% y/y) was below UBS-e in spite of better NII
growth of 11%, mainly due to lower NPL recoveries and higher NPL provisions.
Other highlights: 1) NIM of 3.87% down only 13bpq/q, 2) loan growth of 18%y/y
and flat q/q, 3) NPL slippage stayed high at 4% of loans, 4) LLP rose to 1.5% from
1.2% in Q4FY11, 5) new centralised risk management structure put in place in Q1.
Impact: Lower loan growth estimates to 20%
We lower our loan growth forecast from 24% to 20% in FY12/13 considering the
slowdown in system credit. NPL addition stayed high at 4% of loans against an
expectation of decline due to 1) installing the new centralised risk management, 2)
NPL creation from 1 branch due to improper lending to property developer/home
loans (Rs280 mn) and 3) man days lost due to work disruption by workers
association upon termination of an employee. We maintain LLP forecast at 1.2%
for FY12/13 as we expect NPL addition to fall to 2.5-3.0% in next three qtrs.
Action: Restructuring on track
We cut FY12/13 earnings by 2%/5% as we factor in slower loans. We believe Q1
was one of consolidation and the bank is on track to show improvement in metrics
in next 6-12 months and remains candidate of re-rating. The stock offer attractive
risk –reward at 1.3x FY12 book and 9.8x earnings in our view.
Valuation: Maintain Buy, PT 600
We roll over to mid FY13 and we derive our PT of Rs 600 using a residual income
model which implies 1.6x FY13E book and 10.6x FY13 earnings.
Federal Bank
Federal Bank, established in 1931, is the largest old private sector bank in India
in terms of assets. It was listed on the National Stock Exchange in 1998. At end-
2010, it had a total asset base of Rs462bn and 737 branches in 24 states
(approximately 60% in Kerala). It had a deposit base of Rs369bn and a loan
book of Rs282bn. Non-resident Indians (NRIs) contributed 26% of retail
deposits and the bank's CASA ratio stood at 29%. Federal Bank also holds 26%
equity in a JV life insurance company with IDBI Bank and Fortis Insurance
International. FIIs held a 38% stake in the bank as at December 2010.
Statement of Risk
We believe a sustained economic slowdown could impact Federal Bank and the
banking and finance sector on several fronts, leading to a slowdown in credit
and increased NPL risk, as well as impacting fee income and exerting pressure
on NIM.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
Federal Bank
Q uarter of consolidation
Event: Results below expectations
Q1FY12 net profit at Rs1.46bn (+11% y/y) was below UBS-e in spite of better NII
growth of 11%, mainly due to lower NPL recoveries and higher NPL provisions.
Other highlights: 1) NIM of 3.87% down only 13bpq/q, 2) loan growth of 18%y/y
and flat q/q, 3) NPL slippage stayed high at 4% of loans, 4) LLP rose to 1.5% from
1.2% in Q4FY11, 5) new centralised risk management structure put in place in Q1.
Impact: Lower loan growth estimates to 20%
We lower our loan growth forecast from 24% to 20% in FY12/13 considering the
slowdown in system credit. NPL addition stayed high at 4% of loans against an
expectation of decline due to 1) installing the new centralised risk management, 2)
NPL creation from 1 branch due to improper lending to property developer/home
loans (Rs280 mn) and 3) man days lost due to work disruption by workers
association upon termination of an employee. We maintain LLP forecast at 1.2%
for FY12/13 as we expect NPL addition to fall to 2.5-3.0% in next three qtrs.
Action: Restructuring on track
We cut FY12/13 earnings by 2%/5% as we factor in slower loans. We believe Q1
was one of consolidation and the bank is on track to show improvement in metrics
in next 6-12 months and remains candidate of re-rating. The stock offer attractive
risk –reward at 1.3x FY12 book and 9.8x earnings in our view.
Valuation: Maintain Buy, PT 600
We roll over to mid FY13 and we derive our PT of Rs 600 using a residual income
model which implies 1.6x FY13E book and 10.6x FY13 earnings.
Federal Bank
Federal Bank, established in 1931, is the largest old private sector bank in India
in terms of assets. It was listed on the National Stock Exchange in 1998. At end-
2010, it had a total asset base of Rs462bn and 737 branches in 24 states
(approximately 60% in Kerala). It had a deposit base of Rs369bn and a loan
book of Rs282bn. Non-resident Indians (NRIs) contributed 26% of retail
deposits and the bank's CASA ratio stood at 29%. Federal Bank also holds 26%
equity in a JV life insurance company with IDBI Bank and Fortis Insurance
International. FIIs held a 38% stake in the bank as at December 2010.
Statement of Risk
We believe a sustained economic slowdown could impact Federal Bank and the
banking and finance sector on several fronts, leading to a slowdown in credit
and increased NPL risk, as well as impacting fee income and exerting pressure
on NIM.
No comments:
Post a Comment