Arihant Capital's research report on Federal Bank
The bank’s top-line performance was up as net interest income increased by 23% to Rs 842 crs compared to Rs 686 crs YoY & Rs 791 crs QoQ. Other income rose by 19% to Rs 282 crs YoY. C/I ratio for the bank dropped to 51.16% vs. 56.78% YoY and decreased sequentially by 381 bps. NIM expanded from 3.31% in corresponding quarter of previous year to 3.42% and 10bps sequentially from 3.32%.
Outlook
Federal Bank reported consistent performance backed by NII growth and better operational efficiency. Asset quality too showed improvement. We expect the bank to continue trend with more focus on digitalization and distribution. At CMP stock trades at P/ABV multiple of 1.7x on FY 19E. We have valued the stock at P/ABV multiple of 2.3x & arrived at fair value of Rs 122 per share and have ‘ACCUMULATE’ rating.
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