Buy Federal Bank; target of Rs 110: ICICI Direct

ICICI Direct's report on Federal Bank

Federal Bank looks well poised for a healthy earnings trajectory, going ahead. This is on account of its superior fundamentals given its relative strength with CASA deposit at 34.7%, ability to generate higher NIMs of 3.2-3.3% and a healthy capital base (Tier at 12%).

Outlook

Slippages, which ranged at Rs 300-500 crore in each quarter of FY16, reduced to below Rs 300 crore in the past three quarters of FY17E. We expect the GNPA ratio at 2.3% by FY19E from current ratio of 2.77%. We revise our TP higher to Rs 110 as we roll over to FY19E.