ICICI Securities is bullish on Federal Bank recommended buy rating on the stock with a target price of Rs 70 in its research report dated September 17, 2020.
ICICI Securities research report on Federal Bank
Federal Bank has revised some fees and charges upwards in various banking services effective 1st Oct’20 to ensure further balance stickiness, discipline and realigning with market dynamics. Key changes in liability related charges include: i) Charges on non-maintenance of AMB revised upwards by 20/48%; ii) account closure charges (if closed between 6M to 12M – which no bank charges) revised further to Rs100-300 vs Rs50-100 earlier and iii) locker charges revised upwards in the range of 8-13%. We see two-fold effect of this development: Firstly, it would further strengthen the liability franchise with improved balance stickiness and discipline. Secondly, it supports traction in non-interest income particularly from services (currently contributes ~25% to core fee income, up from ~20% since last revision in charges in Sep’19). Strength and resilience of its liability franchise reflects in 13bps improvement in deposit market share over past two years.
Valuations at 0.7x FY22E offer favourable risk-reward. Maintain BUY.
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