Prabhudas Lilladher is bullish on Federal Bank has recommended buy rating on the stock with a target price of Rs 67 in its research report dated May 29, 2020.
Prabhudas Lilladher's research report on Federal Bank
FB posted a largely in-line set of earnings at Rs3.0bn (PLe: Rs2.82bn) and core PPOP of Rs5.9bn (PLe: Rs6.1bn). Overall PPOP was boosted by strong trading profits and used it to make higher provisions for overdue accounts, COVID impact on certain sectors and improve PCR with benefit of lower slippages from moratorium standstill. Bank also had to provide acturial employee benefits of Rs1.2bn owing to drop in yields. Adjusting to COVID, core performance would have been undeterred but seems slippgaes run rate still would have been at Rs5.0-6.0bn/qtr and still leading to higher provisions. Key negative was NIMs still remaining dismal at 3.0%, while positive was better deposit growth in NRE/Retail TD & SA.
We retain BUY with revised TP of Rs67 (from Rs73) based on 0.9x Mar-22 ABV as valuations are undemanding amongst mid-cap banks.
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