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ICICI Securities
Federal Bank (Buy)
Target: ₹53
CMP: ₹49.2
Federal Bank has revised some fees and charges upwards in various banking services effective October 1, 2020 to ensure further balance stickiness, discipline and realigning with market dynamics.
Key changes in liability related charges include: Charges on non-maintenance of AMB revised upwards by 20/48 per cent; account closure charges (if closed between 6M to 12M – which no bank charges) revised further to ₹100-300 vs ₹50-100 earlier and locker charges revised upwards in the range of 8-13 per cent.
We see two-fold effect of this development: Firstly, it would further strengthen the liability franchise with improved balance stickiness and discipline. Secondly, it supports traction in non-interest income particularly from services (currently contributes approximately 25 per cent to core fee income, up from about 20 per cent since last revision in charges in Sept’19).
Strength and resilience of its liability franchise reflects in 13 bps improvement in deposit market share over past two years.
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