MOSL: FEDERAL BANK (Buy)-Business momentum remains strong-asset quality concerns abating
Federal BANK: Business momentum remains strong; asset quality concerns abating
(FB IN, Mkt Cap USD2.2b, CMP INR82, TP INR105, 28% Upside, Buy)
- Federal Bank (FB) reported above-estimated PAT of INR2.7b in 2QFY19, led by strong other income and controlled provisions. PPoP increased 19.6% YoY (+15.7% QoQ) to INR6.9b. Our full-year estimate suggests FB should deliver PAT of INR6.1b in 2HFY19 (after INR5.3b for 1HFY19).
- NII stood at INR10.2b (+13.7% YoY/+4.3% QoQ, in-line), which, coupled with 12.4% YoY growth in other income, drove 13% YoY growth in total revenue. NIM improved to 3.15% (+3bp QoQ), led by a slight improvement in yields (+4bp QoQ to 9.17%), while cost of deposits improved by 2bp QoQ to 5.66%.
- Loan growth was robust at 25.2% YoY (+7% QoQ), led by 39% YoY growth in corporate loans. Retail book also maintained strong traction with 19.6% YoY growth, while SME book growth was relatively modest. Deposits grew 21.6% YoY to INR1.2t. CASA mix stood at 33.4% (-8bp QoQ).
- Asset quality deteriorated slightly, with GNPA rising 11% QoQ to INR31.8b. Annualized slippages, however, stood in control at 2.5% (2.4% in 1QFY19), despite an increase in SME slippages to INR1.7b (INR0.9b for 1QFY19). PCR was almost flat 43.6%. GNPA/NNPA were 3.1%/1.8% (+11bp/+6bp QoQ). Total NSL (incl. SR book) stands at INR27.8b (2.8% of loans).
Federal Bank is a commercial banking entity based in India. Co. is engaged in offering its customers private and commercial banking, leasing and merchant banking services, through its head office in Aluva and its 422 branches. Co. maintains a full range of delivery channels including, Internet Banking, Mobile Banking and Alerts, Any Where (Branch) Banking, Interconnected Visa enabled ATM network, E-mail Alerts, Telephone Banking and a Centralised customer Call Centre with toll free number. Co. offers its customers 24 hour banking service from various service channels. As of Mar 31 2003, Co.'s total assets and deposits amounted to IRs122,011,685,000 and IRs109,460,167,000, respectively.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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