ICICI Direct is bullish on Federal Bank has recommended buy rating on the stock with a target price of Rs 125 in its research report dated May 06, 2019.
ICICI Direct's research report on Federal Bank
Slippages continued to moderate to a normalised level at Rs 256 crore vs. Rs 426 crore in Q3FY19 and Rs 872 crore in Q4FY18. Elevated slippages in the corporate segment, which led to a surge in NPA, cooled off during the quarter. Lower slippages, coupled with healthy recovery led to a QoQ decline in absolute GNPA to Rs 3261 crore and GNPA ratio by ~22 bps to 2.92%. The bank has exposure to three SPVs of IL&FS totalling Rs 245 crore, currently classified as standard with provision at Rs 21 crore. Apart from IL&FS, there is negligible exposure to other talked stressed groups.
Overall, the bank is moving in the right direction to build strong and sustainable earnings momentum. Rolling over to FY21E, we revise our target price to Rs 125 per share (earlier Rs 110), valuing the stock at ~1.7x FY21E ABV.
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