Federal Bank - Q1FY14 Result Review - Angel Broking

Federal Bank announced a weak set of numbers. On the operating front, Net Interest Income (NII) grew marginally by 3.7% yoy to Rs. 510cr. But non-interest income grew strong by 73.6% yoy at Rs. 216cr, primarily boosted by treasury gains. Operating expenses of the bank grew by 20.6% yoy to Rs. 325cr. Thus backed by non-interest income, pre provisioning profit grew by healthy 15.6% at Rs. 401cr. Provisioning expense came in 290% yoy higher at Rs. 245cr, which resulted in 44.5% yoy earnings de-growth.

On the asset quality front gross and net NPA levels went down sequentially by 4.6% and 13.5% respectively. We await further clarity from the management regarding the asset quality performance and the sharp increase in provisioning expenses during the quarter. At the CMP, the stock trades at a valuation of 0.9x FY2014E ABV and 0.8x FY2015E.

We maintain our Neutral recommendation on the stock.

Source : Equity Bulls

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