HDFC Securities' research report on Federal Bank
After a heart-warming and broad based recovery over FY17, FB’s 1QFY18 saw a minor blip in slippage (a one-off, in our view). This led to lower margins (despite sustained growth) and higher provisions (to keep PCR at 70%+). The quarter saw higher Corporate segment slippages (mostly relapse) and demonet/farm waiver impact on Retail and Agri segments. Encouragingly, SME slippages fell QoQ.
Outlook
Led by controlled opex (flat QoQ) and higher treasury gains (+2x QoQ), the bank’s C-I ratio was stable QoQ (50.6%). With superior growth and controlled opex, we have factored in a steady C-I ratio of ~50.7%.
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