{"id":985,"date":"2019-10-18T00:21:38","date_gmt":"2019-10-18T00:21:38","guid":{"rendered":"https:\/\/jobbinghood.com\/finance\/2019\/10\/18\/stock-corner-maintain-buy-on-federal-bank-revised-target-price-of-rs-110\/"},"modified":"2019-10-18T00:21:38","modified_gmt":"2019-10-18T00:21:38","slug":"stock-corner-maintain-buy-on-federal-bank-revised-target-price-of-rs-110","status":"publish","type":"post","link":"https:\/\/jobbinghood.com\/magazine\/2019\/10\/18\/stock-corner-maintain-buy-on-federal-bank-revised-target-price-of-rs-110\/","title":{"rendered":"Stock corner: Maintain &#8216;buy&#8217; on Federal Bank, revised target price of Rs 110"},"content":{"rendered":"<p> [ad_1]<br \/>\n<\/p>\n<div>\n<div class=\"article-image\">\n<figure><img fetchpriority=\"high\" decoding=\"async\" class=\"lazy lazy-hidden size-full wp-image-1738949\" src=\"http:\/\/www.financialexpress.com\/wp-content\/plugins\/a3-lazy-load\/assets\/images\/lazy_placeholder.gif\" data-lazy-type=\"image\" data-src=\"https:\/\/images.financialexpress.com\/2019\/10\/fed-bank.jpg\" alt=\"Stock corner, buy, Federal Bank, target price, market news,\u00a0PAT,\u00a0opex growth,\u00a0NII,\u00a0HFC, financial conglomerate , IL&amp;FS\" width=\"660\" height=\"440\" srcset=\"\" data-srcset=\"https:\/\/images.financialexpress.com\/2019\/10\/fed-bank.jpg 660w, https:\/\/images.financialexpress.com\/2019\/10\/fed-bank-300x200.jpg 300w, https:\/\/images.financialexpress.com\/2019\/10\/fed-bank-620x413.jpg 620w, https:\/\/images.financialexpress.com\/2019\/10\/fed-bank-401x267.jpg 401w\" sizes=\"(max-width: 660px) 100vw, 660px\"\/><noscript><img decoding=\"async\" class=\"size-full wp-image-1738949\" src=\"https:\/\/images.financialexpress.com\/2019\/10\/fed-bank.jpg\" alt=\"Stock corner, buy, Federal Bank, target price, market news,\u00a0PAT,\u00a0opex growth,\u00a0NII,\u00a0HFC, financial conglomerate , IL&amp;FS\" width=\"660\" height=\"440\" srcset=\"https:\/\/images.financialexpress.com\/2019\/10\/fed-bank.jpg 660w, https:\/\/images.financialexpress.com\/2019\/10\/fed-bank-300x200.jpg 300w, https:\/\/images.financialexpress.com\/2019\/10\/fed-bank-620x413.jpg 620w, https:\/\/images.financialexpress.com\/2019\/10\/fed-bank-401x267.jpg 401w\" sizes=\"(max-width: 660px) 100vw, 660px\"\/><\/noscript><span class=\"article-caption\">Margins could remain slightly subdued, even as FB has changed the loan pricing methodology from T-Bill to repo rate.<\/span><\/figure>\n<\/div>\n<p>Business growth moderates; asset quality marginally under pressure PAT increased 57% Y-o-Y to Rs 420 crore (our estimate: Rs 440 crore) in 2QFY20 on the back of a lower tax rate, even as employee expense increased by 43% Y-o-Y due to retiral\/wage provisions. PBT grew 14% YoY to Rs 470 crore.<\/p>\n<p>The NII growth moderated to 10% Y-o-Y (Rs 1,120 crore), affected by interest reversals, yields compression on loans linked to T-bill, and negative carry due to excess liquidity. NIM thus moderated by 14bp Q-o-Q to ~3.0%.<\/p>\n<p>Other income grew 30% Y-o-Y, led by a significant rise of 27% in fee income. Total income growth (15% YoY) trailed opex growth, resulting in muted 3% Y-o-Y growth in PPoP, while the C\/I ratio was up ~410bp QoQ to 53.5%.<\/p>\n<p>The loan growth moderated to 14.8% Y-o-Y, led by sluggish trends in corporate\/commercial banking, while retail loans continued growing strongly at 25% YoY. Deposit base grew 18% Y-o-Y to Rs 1.4 lakh crore.<\/p>\n<p><strong>Other highlights:<\/strong> The lender maintained its credit cost guidance of 60-62bp for FY20. Stressed exposures: The bank\u2019s exposure toward HFC\/financial conglomerate \/IL&amp;FS stands at Rs 475 crore, wherein it is carrying a standard provision of Rs 720 million, while exposure to real estate group stands at Rs 300 crore.<\/p>\n<p><strong>Valuation view:<\/strong> FB has reported a moderation in loan growth, reflecting the challenging macro environment. The slippage trajectory remains uneven as FB recognises stressed account into non-performing, but it continues guiding for controlled credit cost of 60-62bp, enabled by a lower quantum of stressed assets. However, the coverage ratio of 66.2% (including TWO) remains healthy.<\/p>\n<p>Margins could remain slightly subdued, even as FB has changed the loan pricing methodology from T-Bill to repo rate. We cut our earnings estimate by 6%\/9% for FY20\/21 and estimate RoA\/RoE at 1.0%\/13.3% by FY21. Maintain Buy with a revised target price of Rs 110 (1.4x FY21E ABV).<\/p>\n<div class=\"common-bottom-text\">\n<p>Get live <a href=\"https:\/\/www.financialexpress.com\/market\/stock-market\/\" target=\"_blank\" rel=\"noopener noreferrer\">Stock Prices<\/a> from BSE and NSE and latest NAV, portfolio of <a href=\"https:\/\/www.financialexpress.com\/mutual-funds-india\/\" target=\"_blank\" rel=\"noopener noreferrer\">Mutual Funds<\/a>, calculate your tax by <a href=\"https:\/\/www.financialexpress.com\/income-tax-calculator\/\" target=\"_blank\" rel=\"noopener noreferrer\">Income Tax Calculator<\/a>, know market\u2019s <a href=\"https:\/\/www.financialexpress.com\/market\/stock-market\/nse-top-gainers\/\" target=\"_blank\" rel=\"noopener noreferrer\">Top Gainers<\/a>, <a href=\"http:\/\/www.financialexpress.com\/market\/stock-market\/nse-top-losers\/\" target=\"_blank\" rel=\"noopener noreferrer\">Top Losers<\/a> &amp; <a href=\"https:\/\/www.financialexpress.com\/mutual-funds-india\/equity-funds\/\" target=\"_blank\" rel=\"noopener noreferrer\">Best Equity Funds<\/a>. Like us on <a href=\" https:\/\/www.facebook.com\/thefinancialexpress\" target=\"_blank\" rel=\"noopener noreferrer\">Facebook<\/a> and follow us on <a href=\" https:\/\/twitter.com\/FinancialXpress\" target=\"_blank\" rel=\"noopener noreferrer\">Twitter<\/a>.<\/p>\n<\/div>\n<\/div>\n<p><script async src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><br \/>\n<br \/>[ad_2]<br \/><\/p>\n","protected":false},"excerpt":{"rendered":"<p>[ad_1] Margins could remain slightly subdued, even as FB has changed the loan pricing methodology from T-Bill to repo rate. Business growth moderates; asset quality marginally under pressure PAT increased 57% Y-o-Y to Rs 420 crore (our estimate: Rs 440 crore) in 2QFY20 on the back of a lower tax rate, even as employee expense [&hellip;]<\/p>\n","protected":false},"author":348,"featured_media":986,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[],"class_list":["post-985","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-markets"],"_links":{"self":[{"href":"https:\/\/jobbinghood.com\/magazine\/wp-json\/wp\/v2\/posts\/985","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/jobbinghood.com\/magazine\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/jobbinghood.com\/magazine\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/jobbinghood.com\/magazine\/wp-json\/wp\/v2\/users\/348"}],"replies":[{"embeddable":true,"href":"https:\/\/jobbinghood.com\/magazine\/wp-json\/wp\/v2\/comments?post=985"}],"version-history":[{"count":0,"href":"https:\/\/jobbinghood.com\/magazine\/wp-json\/wp\/v2\/posts\/985\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/jobbinghood.com\/magazine\/wp-json\/wp\/v2\/media\/986"}],"wp:attachment":[{"href":"https:\/\/jobbinghood.com\/magazine\/wp-json\/wp\/v2\/media?parent=985"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/jobbinghood.com\/magazine\/wp-json\/wp\/v2\/categories?post=985"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/jobbinghood.com\/magazine\/wp-json\/wp\/v2\/tags?post=985"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}