We had
recommended Federal Bank to our investors on September 30, 2016 when the scrip
was trading at Rs 72. After our recommendation Federal Bank had posted strong
financial performance for the September 2016 quarter. With the demonetisation
taking place in between (On November 8, 2016) a lot of volatility was seen in
the Indian equity markets (with a negative bias). With demonetisation taking
place Banks were asked to focus on the change of currency and the overhang of
lesser currency in markets was expected to impact the GDP growth as well. Hence
Banks that were already reeling under the pressure had another challenge. However
the results of comparatively smaller banks like IndusInd Bank and South Indian
Bank indicated that there is hardly any impact of De-monetisation on the banks.
And if Federal Bank results are anything to go by, it seems that the Smaller
Banks are comparatively better placed than the larger peers.
Federal Bank for
the quarter ended December 2016 (Q3FY17) has posted a strong performance on all
the operational and financial parameters both on YoY and QoQ basis.
Operational Performance
On the
operational front, the Operating profit of the Bank increased by 45.91 percent YoY
to reach Rs. 474.90 crore as on December 31, 2016. The Net Profit increased by
26.39 percent YoY to reach Rs. 205.65 crore. Federal Bank earned a Net Interest
Income (NII) of Rs 791.39 crore for the Q3FY17. The Net Interest Margin of the
Bank stood at 3.32 percent showing and improvement of 1 basis point on Q-o-Q
basis and 28 basis points on Y-o-Y basis.
|
Particulars
|
Q3FY17
|
Q3FY16
|
% y-o-y growth
|
|
Net Interest Income
|
791.39
|
605.69
|
é30.66%
|
|
Other Income
|
263.33
|
182.82
|
é44.04%
|
|
Net Total Income
|
1054.72
|
788.51
|
é33.76%
|
|
Operating Profit
|
474.90
|
325.48
|
é45.91%
|
|
Net Profit
|
205.65
|
162.72
|
é26.39%
|
|
Rs in Crore
|
|||
As regards the deposits
and advances growth, CASA ratio improved to 34.66 percent as against 31.04
percent in September 2016 (On Expected line with Cash Deposits occurring due to
Demonetisation). On the advances front, traction was visible on segments like
retail, Agri, SME and Wholesale. Total advances for December 2016 stood at Rs
70439 crore as against Rs 65439 crore in September 2016.
Asset Quality – Improves Despite Pressure
The Gross NPA
and Net NPA of the Bank as at the end of the Quarter stood at Rs 1951.55 crore and Rs 1102.37 crore respectively. Gross
NPA as a percentage reduced to 2.77 percent (2.78 percent in September 2016) and
Net NPA as a percentage to Net Advances stood at 1.58 percent (1.61 percent in
September 2016). The Provision Coverage Ratio (including technical write-offs)
is 71.01 percent.
While it may not
look very good on superficial levels, there is lot to look at for detailed
numbers. Like fresh accretions were only Rs 273 crore as against Rs 386 core in
Q3FY16. Further it is the retail and SME Segment exposure that contributed to
major increase in Gross NPAs. However we feel that scenario is expected to
improve in both segments. Hence we would be surprised to see a significant
improvement on slippages front in March 2017 quarter.
Overall the
performance has been really good for the quarter and we maintain our target
price of Rs 94.
Financial Highlights
|
Business
Figures
|
As on
31.12.2016
(Rs. in Crore)
|
As on
31.12.2015
(Rs. in Crore)
|
Growth
(%)
|
|
Total Deposits
|
92235.65
|
74792.04
|
é23.32%
|
|
SB & Demand Deposits
|
32817.19
|
24439.60
|
é34.27%
|
|
Net Advances
|
69629.22
|
52752.81
|
é31.99%
|
|
Retail Advances
|
21309.78
|
16774.91
|
é27.03%
|
|
SME Advances
|
16323.99
|
14032.91
|
é16.33%
|
|
Agri Advances
|
6774.65
|
6062.09
|
é11.75%
|
|
Investments
|
28519.93
|
24647.33
|
é15.71%
|
|
Capital
|
|
|
|
|
Equity Capital
|
344.43
|
343.67
|
|
|
Net Worth
|
8601.24
|
8223.66
|
é4.59%
|
|
Capital Adequacy (%)
|
12.28%
|
14.32%
|
|
|
Tier I (%)
|
11.63%
|
13.74%
|
|
|
Tier II (%)
|
0.65%
|
0.58%
|
|
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