EUR 120.00 For Business Accounts Only

MOSL: Morning India (21/January/20): 1. Federal Bank (Business growth moderates; asset quality outlook turning better); 2. Kotak Mahindra Bank; 3. Financials; 4. Hindustan Zinc; 5. L&T Financial Holdings; 6. J

Morning India (21/January/20):

Today’s top research idea
Federal Bank: Business growth moderates; asset quality outlook turning better
** FB reported moderation in business growth due to the weak environment and higher repayments/stress account resolutions. Although slippages stood elevated, bulk of it came from the pre-disclosed watch-list, which resulted in an overall decline in stressed assets.

** PAT of INR4.4b (+32% YoY) came in higher than our estimate as provisions were lower at INR1.6b (-36% QoQ) aided by lower charge on debit card loyalty points. NII growth moderated to 7% YoY (INR11.5b), affected by interest reversals of INR0.2b, while margins stood stable at 3%.

** FB is taking a cautious approach in building the loan mix toward high-rated corporate and retail loans, while strong liability franchise will enable lower cost of funds, supporting margins. We estimate earnings CAGR of 27% over FY19-22 and RoA/RoE of 1.1%/14.9% by FY22. Maintain Buy with a revised TP of INR115 (1.4x Sep21E ABV).

Piping hot news
IMF cuts India’s FY20 growth forecast to 4.8%
The International Monetary Fund has slashed its estimate on India’s 2019 economic growth to 4.8% from the 6.1% expansion it projected in October, citing a sharper-than-expected slowdown in local demand and stress in the non-bank financial sector.