Motilal Oswal is bullish on Federal Bank has recommended buy rating on the stock with a target price of Rs 65 in its research report dated May 28, 2020.
Motilal Oswal 's research report on Federal Bank
Federal Bank (FB) reported moderation in 4QFY20 business growth affected by the weak environment. The bank made higher COVID-19 related provisions of INR930m, which dragged earnings in the quarter. PPoP was strong at 27% YoY (aided by treasury gains) while moratorium book stood at 35%. Lower slippages (as FB availed dispensation given by the RBI) and higher provisions, resulted in overall improvement in asset quality/PCR. We have cut our FY21E estimates sharply by 19% as we factor in higher credit cost and slight moderation in business growth. However, we largely maintain our FY22E estimates. Maintain Buy.
We estimate FB to report RoA/RoE of 0.9%/10.9% by FY22E. Maintain Buy with a revised TP of INR65 (0.8x FY’22E ABV).
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