Federal Bank - March 2013 Results Preview - Motilal Oswal

- On a sequential basis, loan and deposit growth are expected to remain strong at 9/10% each. However, on a YoY basis, they are expected to be moderate at 14% and 16% respectively.

- Margins are expected to be largely stable QoQ at 3.5%. Shedding of high cost deposits in 3QFY13 would provide cushion to NIMs.

- On a higher base, slippages are expected to decline QoQ. In 3QFY13, the bank recognized a large account of INR2.2b as NPA, which is unlikely to be repeated. We factor a slippage ratio of 2.9% and credit cost of 0.5%.

- Fee income growth is expected to remain healthy at 17%. However, a moderate increase in non-core income will lead to overall non-interest income growth of 9% YoY.

- The stock trades at 1.2x FY14E and 1.1x FY15E BV, and 8.9x FY14E and 7.9x FY15E EPS. Maintain Buy.

Source : Equity Bulls

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