Federal Bank - Q1 FY22 Result Report - YES Securities

(Rating: BUY, TP: Rs111, Upside: 30%)

- Asset quality: FED upfronted slippages of Rs 6.4bn while taking a benevolent stand on restructuring, which rose to 1.82% of advances, up 78 bps QoQ

- Margin picture: NIM shrank 8 bps QoQ, impacted by an interest reversal of Rs 0.65bn, with management guiding for a reversion to 3.20% by the end of FY22

- Asset growth: Advances de-grew/grew -1.6%/7.0% QoQ/YoY supported by the agri book, which grew 4.7%/23.4% QoQ/YoY

- Opex control: Total opex declined -6.7% QoQ but management guided for a reversion to a cost to income ratio of 48%

- Fee income: Core fee income declined -29.7% QoQ due to weakness in processing fees, third-party distribution and cards

- We maintain 'Buy' rating on FED with a revised price target of Rs 111: We value the standalone bank at 1.0x FY23 P/BV for an FY22E/23E/24E RoE profile of 11.9/13.7/14.4%. We assign a value of Rs 7.5 per share to the subsidiaries, on SOTP.

Shares of FEDERAL BANK LTD. was last trading in BSE at Rs. 86.35 as compared to the previous close of Rs. 87.25. The total number of shares traded during the day was 1303288 in over 3264 trades.

The stock hit an intraday high of Rs. 88.4 and intraday low of 86.1. The net turnover during the day was Rs. 114395413.

Source : Equity Bulls

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