Federal Bank
Better times ahead
Rating: Buy
(CMP: 77, Price Target: 95)
Company Description
Federal Bank (FB) is an old-generation private sector bank headquartered at Aluva, Kerala. The bank operates in four segments: treasury operations, wholesale banking, retail banking, and other banking operations. The bank has 1,250+ branches and 1,900+ ATMs/Recyclers and has its representative offices at Abu Dhabi and Dubai and an IFSC Banking Unit (IBU) in Gujarat International Finance Tec-City (GIFT City).
Key Investment Arguments
➡️Q3FY21 numbers were encouraging, with healthy operational numbers (helped by sequentially lower provisions) and steady asset quality.
➡️GNPA/NNPA fell to 2.71% / 0.6% (from 2.84%/0.99% in Q2FY21), with negligible slippages (due to the SC order). Including proforma slippages, GNPA and NNPA ratios would have been at 3.38% and 1.14%, respectively.
➡️We believe that the bank is better placed in terms of book quality, with a 95% collection efficiency and as ~76% of wholesale borrowers are rated ‘A & above’. Credit cost outlook appear to be manageable
➡️We maintain a Buy on the stock with a revised price target (PT) of Rs. 95.
