Anand Rathi: Steady Quarter For Federal Bank; Stable Asset Quality
BQ Blue’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages. These reports offer BloombergQuint’s subscribers an opportunity to expand their understanding of companies, sectors and the economy.
Anand Rathi Report
Higher treasury income and Net Interest Margin expansion led to strong, 19%, y/y growth in Federal Bank’s Q1 operating profits. Higher provisions incl. Rs 930 million Covid-related led to flat 4% y/y earnings growth. Higher accelerated provisions led to a 510 basis point sequential increase in Provision Coverage Ratio. The moratorium book for the bank sharply declined. We maintain a Buy with a target price of Rs 58 (earlier Rs 55).
With an expected higher slippage rate in H2 FY21, we have built in 2% credit costs for financial year 21. Higher credit costs combined with weaker operating performance (attributed to slower business growth) would keep the bank’s earnings weak in FY21. We estimate a 0.3% Return on Assets for FY21, and 0.9% for FY22.
Click on the attachment to read the full report:
This report is authored by an external party. BloombergQuint does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the brokerage and do not represent the views of BloombergQuint.
Users have no license to copy, modify, or distribute the content without permission of the Original Owner.