Buy Federal Bank; target of Rs 405: Way2Wealth

10833 Investors following Federal Bank. Share this News with them.

0

Like this story, share it with millions of investors on M3

Buy Federal Bank; target of Rs 405: Way2Wealth

Way2Wealth is bullish on Federal Bank and has recommended buy rating on the stock with a target of Rs 405 in its August 29, 2011 research report.

Post your opinion here

 

0

Tweet

Share on Tumblr

RELATED NEWS Hold KSK Energy, JP Power, Rcom, Lanco Infra: Emkay Angel Broking neutral on Coal India Angel Broking picks L&T, IVRCL, Sadbhav Engg, IRB Infra ALSO READ See previous views by Way2Wealth See what other Experts & Brokerages are saying about Federal Bank See messages about Federal Bank Federal Bank BSE | NSE 01/06/12 Are Mutual Funds betting on Federal Bank?

Way2Wealth is bullish on Federal Bank and has recommended buy rating on the stock with a target of Rs 405 in its August 29, 2011 research report.

"The Federal Bank Limited (FBL) is a Kerala based old generation private bank with a branch network of 746 branches & a business size of Rs.749 bn. Currently, FBL is the 4th largest private bank in India. It has a high low cost deposit ratio mainly on account of CASA and low cost NRI deposits. Its major business comes in from the state of Kerala which also accounts for 60% of its network."

"FBL is going in for a major make-over in the operations of the bank. We believe that the new MD should aid in setting up the stage for the next growth phase of the bank. FBL is in the process of implementing centralized loan processing system for all loans above Rs.2.5 mn post the approval from head office and for loans between Rs.1-2.5 mn; regional offices are supposed to do the sanctions post the credit assessment of the client. This will enable the bank to capture the incremental slippages which were arising out of regular business due to the sanctioning of loans without any centralized system. This will also aid in better growth of the business of the bank. FBL has been filling up top positions in the bank for better performance, smoothen up the processes and transform this bank into a new generation bank."

"FBL's NIM for Q1FY12 was at 3.9% due to high share of low cost deposits in its liability franchise. NIM has also been driven by shift in advance portfolio towards the high yielding loans for eg. Gold loans. Of late, the focus of FBL has been shifting to corporates & retail segment from SME which should aid in other income. FBL has had high slippages in the recent times mainly on account of the NRI housing portfolio and poor asset quality in the SME segment. However, with the new team being set up for recovery and centralization of loans, we expect asset quality to improve going ahead. FBL has been very aggressive with its loan loss provisions and we expect the same to continue."

"Currently at Rs 334, the stock is available at price to adj book value (P/ABV) of 1x of FY13E. We expect the organizational restructuring to aid healthy growth of the business of FBL. We expect the RoE to improve to ~14% on account of higher leverage over the next few years. We value the bank's business at 1.2x FY13E P/ABV and initiate coverage on the stock with a price target of Rs.405 which is an upside of ~21% from the CMP," says Way2Wealth research report.

Quarterly Shifts by Morgan Stanley

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

To read the full report click on the attachment