JM Financial is bullish on Federal Bank has recommended buy rating on the stock with a target price of Rs 120 in its research report dated Octobe 16, 2018.
JM Financial's research report on Federal Bank
Federal Bank reported profit of INR 2.66bn in 2QFY19 (flat YoY, 2.7% above JMFe). While NII was broadly in-line with our estimates, a strong performance on core fees (+34% YoY) resulted in a PPoP beat of 19%. Provisions for the quarter were, however, elevated (specific credit cost at 0.9%) as gross slippages came at 2.1%. Slippages (INR 4.8bn) were elevated on account of the floods in Kerala (c.10% of slippage).Management disclosed that FB has an overall exposure of c.INR 2bn to the IL & FS Group (0.2% of loans), spread across 3 operational projects, where it does not expect significant stress. Management expects slippages on account of Kerala floods to be contained at INR 1.5bn in FY19.
Outlook
We now build slippages of INR 15.4bn (1.7% delinquency) in FY19, resulting in a cut in our PAT estimates by 3.4% for FY19. We believe FB can deliver RoA/ RoE of 1% / 13% in FY20E.
For all recommendations report, click here
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