Comments
Narnolia Financial
Federal Bank (Buy)
CMP: ₹89.8
Target: ₹112
Slippages from Kerala flood was in line with management guidance. The full year guidance of credit cost was intact at 65-70 bps but slippage seems to surpass the earlier guidance marginally. Management has also maintained its guidance to exist with 1 per cent RoA (return on asset) in 4Q FY19. NIM (net income margin) has been improving marginally since last few quarters and with MCLR rate reset in retail portfolio, NIM is likely to improve marginally going ahead.
Fee income showed strong traction during the quarter and management expects the momentum to continue going ahead. However, there was some spike in operating cost led by pension revaluation and CSR expenses. However management is confident to improve C/I (cost/income) ratio going ahead.
Federal Bank has been consistently delivering strong growth on loan book on the back of increase in market share in corporate loan. Bank has ₹245-crore exposure to IL&FS’s subsidiary which is ring fenced by escrow account. Though recent announcement SME restructuring by the RBI will curtail down the slippages in SME portfolio, restructured assets is likely to increase.
We maintain ‘buy’ with the target price of ₹112 at 1.5x P/BV FY20e.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.