Dear All,
Forwarding you the Result Update on Federal Bank for 4QFY2011 with an Accumulate recommendation and a Target Price of `447 (12 months).
For 4QFY2011, Federal Bank recorded healthy net profit growth of 47.0% yoy and 20.0% qoq to `172cr, slightly above our estimates. NII grew by moderate 9.3% yoy and by marginal 0.1% qoq to `448cr. Strong sequential business growth and improvement in asset quality were the key highlights of the results. We maintain our Accumulate view on the stock.
Strong sequential business growth with lower slippages: For 4QFY2011, business growth was strong on a qoq basis, with advances increasing by 13.1% qoq (18.6% yoy) to `31,953cr and deposits registering growth of 16.5% qoq (19.3% yoy) to `43,015cr. CASA ratio stood at 26.3% compared to 29.0% in 3QFY2011 and 26.2% in 4QFY2010. Including low-cost NRI deposits, overall low-cost deposits stood at 33.0% of total deposits. The cost of funds increased by 30bp qoq to 6.38%. Reported NIM contracted by 31bp qoq to 4.0% from 4.31% in 3QFY2011. Gross NPAs and net NPAs decreased sequentially by 0.4% and 16.0%, respectively. Gross NPA ratio improved to 3.5% (4.0% in 3QFY2011), while net NPA ratio improved to 0.6% (0.8% in 3QFY2011). Gross slippages came in lower at `289cr (as against `321cr in 3QFY2011), indicating an annualised slippage ratio of 4.3% (4.8% in 3QFY2011). The provision coverage ratio excluding technical write-offs stood at 83.4%. The bank’s capital adequacy ratio (CAR) stood at 16.8% with tier-I capital at 15.6%.
Outlook and valuation: At the CMP, the stock is trading at 1.1x FY2013E ABV. While lower leverage is leading to low RoE at present, the bank’s core RoAs are relatively high and should improve further as asset-quality pressures start moderating. We maintain our Accumulate recommendation on the stock, assigning a multiple of 1.2x FY2013E P/ABV to arrive at a target price of `447.
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If you have any further queries, feel free to call us on 022 39357600, Extn: 6865 or mail us at advisory@angelbroking.com
With best regards,
Fundamental Advisory Desk
Angel Broking
Akruti Star,6th Floor, Road No.7,MIDC, Andheri (E),Mumbai – 93.
Call : (91) (022) 39357600 Ext. 6865
Website : www.angelbroking.com
Disclaimer: Ours is an advisory role. The final decision and consequences based on our information is solely yours. Moreover, in keeping with regulatory guidelines, we do not guarantee any returns on investments. Prospective investors and others are cautioned that any forward-looking statements are not predictions and may be subject to change without notice.
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