Dear All,
Forwarding you the Result Flash on Federal Bank for 4QFY2011 with an Accumulate recommendation.
For 4QFY2011, Federal Bank registered strong net profit growth of 47% yoy and 20% qoq to Rs172cr, slightly above our estimates, primarily on account of lower than estimated provisioning expenses. The Net Interest Income (NII) grew by moderate 9.3% yoy and by marginal 0.1% qoq to Rs448cr. Non-interest income grew by 16.0% qoq (by 8.1% yoy) to Rs141cr. Staff expenses increased by 40% yoy to Rs135cr. The bank provided Rs34cr in respect of second option for pension by employees other than separated/retired employees and Rs8cr in respect of retired employees. Balance second option pension liabilities carried forward stands at Rs135cr. The cost-to-income ratio stood at 40.5% compared to 37.3% in 3QFY2011 and 34.9% in 4QFY2010. The asset quality of the bank improved during the quarter with absolute Gross NPAs declining sequentially by 0.4% to Rs1,148cr, while Net NPAs went down by 16% to Rs191cr. The Gross NPA ratio stood at 3.5% (4.0% in 3QFY2011), while Net NPA ratio stood at 0.6% (0.8% in 3QFY2011). The provision coverage ratio excluding technical write-offs improved to 83.4% from 80.3% in 3QFY2011. The capital adequacy ratio (CAR) stands at 16.8% as of 4QFY2011.
At the CMP, the stock is trading at 1.1x FY2013E P/ABV. We maintain an Accumulate rating on the stock. We may revise our estimates post interaction with the management.
| Exhibit 1: 4QFY2011 Actual vs. Estimates | |||
| (Rs cr) | Actual | Estimates | Var (%) |
| Net interest income | 448 | 461 | (2.9) |
| Non-interest income | 141 | 139 | 1.9 |
| Operating income | 589 | 600 | (1.8) |
| Operating expenses | 239 | 219 | 8.9 |
| Pre-prov. profit | 350 | 380 | (7.9) |
| Provisions & contingencies | 79 | 144 | (44.9) |
| PBT | 271 | 236 | 14.6 |
| Prov. for taxes | 99 | 72 | 36.8 |
| PAT | 172 | 164 | 4.8 |
Source: Company, Angel Research
Exhibit 2: 4QFY2011 Performance summary
| (Rs cr) | 4QFY2011 | 3QFY2011 | % chg (qoq) | 4QFY2010 | % chg (yoy) |
| Interest earned | 1,100 | 1,022 | 7.6 | 953 | 15.4 |
| Interest expenses | 652 | 575 | 13.5 | 543 | 20.0 |
| Net interest income | 448 | 447 | 0.1 | 410 | 9.3 |
| Non-interest income | 141 | 122 | 16.0 | 131 | 8.1 |
| Operating income | 589 | 569 | 3.5 | 540 | 9.0 |
| Operating expenses | 239 | 212 | 12.4 | 188 | 26.6 |
| Pre-prov. profit | 350 | 357 | (1.8) | 352 | (0.4) |
| Provisions & contingencies | 79 | 142 | (44.2) | 98 | (18.9) |
| PBT | 271 | 214 | 26.3 | 254 | 6.7 |
| Prov. for taxes | 99 | 71 | 39.1 | 137 | (27.7) |
| PAT | 172 | 143 | 20.0 | 117 | 47.0 |
| EPS (Rs) | 10.0 |
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