Buy Federal Bank; target of Rs 102: Prabhudas Lilladher

Prabhudas Lilladher is bullish on Federal Bank has recommended buy rating on the stock with a target price of Rs 102 in its research report dated October 16, 2018.

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October 18, 2018 / 14:15 IST

26 Aug, 2025 12:21

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Prabhudas Lilladher's research report on Federal Bank

FB's earnings of Rs2.66bn (PLe: Rs2.37bn) was better than expected mainly on beat from strong PPOP growth of 20% YoY. Operating performance was helped by better NII growth of 14% YoY, supported by 12% growth in other income and controlled opex growth of 8% YoY. Provisions were tad higher largely higher investment provisions on MTM, mark down in value of investment in subs and security receipts. Asset quality saw small deterioration as slippages continue to be above trends but maintained PCR. Bank witnessed much lower impact from floods and likely not see much ahead as well. We believe structutal improvement in margins and reduction in slippages will only help improve ROAs beyond 1%, but strong loan growth, stable retail deposit mix and lowering C/I should help ROAs improvement in medium term.

Outlook

We retain BUY with revised TP of Rs102 (from Rs119) based on 1.5x Sep-20 ABV as we lower our estimates on margins and increase credit cost, while also increase cost of equity assumptions.

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