Accumulate Federal Bank; target of Rs 425: Emkay

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Accumulate Federal Bank; target of Rs 425: Emkay

Emkay Global Financial Services is bullish on Federal Bank and has recommended accumulate rating on the stock with a target of Rs 425 in its October 24, 2011 research report.

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Emkay Global Financial Services is bullish on Federal Bank and has recommended accumulate rating on the stock with a target of Rs 425 in its October 24, 2011 research report.

"Federal Bank (FB) Q2FY12 NII came in at Rs4.7bn, inline with expectation. The growth in NII was driven by 21.6% yoy (5.1% qoq) growth in loan book, albeit NIM's contracted by 9bps qoq to 3.4%."

"The bank's balance sheet growth picked up during the quarter with 21.6%yoy (5.1%qoq) growth in advances as against flattish advance growth in the preceding quarter. However deposit growth came in even much strong at 10.1%qoq resulting in 335bps decline in CD ratio to 71%. Resultantly NIM's contracted by 10bps to 3.8%. Though CASA deposit in absolute terms grew by 6.7%qoq to Rs125bn, however as other deposits grew by a higher 12.4%qoq, CASA share in total deposit came down by 83bps to 26.4%. Moreover with low cost NRI deposit remaining largely stable at Rs26bn, overall low cost deposit share in the total deposit came down slightly to 31.3%. The bank added 77 branches during the quarter, taking the total network to 823 branches, inline with the banks expansion strategy. The bank plans to open another ~80 branches by March 2012. We believe as the business picks up in these branches, the CASA profile and the branch productivity will improve further."

"As highlighted in our initiating report dated 18th Oct 2011, the various initiatives taken by the management in improving the risk management systems and strengthening the recovery process have started to pay off, as evident from the moderation in slippages and higher recoveries during the quarter. We expect the improvement to continue in the coming quarters. At CMP, the stock trades at 1.2x FY12 and 1.0x FY13 ABV. We maintain ACCUMULATE rating on the stock with price target of Rs 425," says Emkay Global Financial Services research report. 

Institutional holding more than 40% in Indian cos

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To read the full report click on the attachment