The Bank is better placed as compared to mid-size private sector banks in terms of granular liability franchise, a well-diversified loan book, and capital positioning.
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//$ .each(d.ac,function(i,v) //{ // accStr+=”+v.nm+”; //}); $ .each(d.data,function(i,v) { if(v.flg == ‘0’) { var modalContent = ‘Scheme added to your portfolio.’; var modalStatus = ‘success’; //if error, use ‘error’ $ (‘.mc-modal-content’).text(modalContent); $ (‘.mc-modal-wrap’).css(‘display’,’flex’); $ (‘.mc-modal’).addClass(modalStatus); //$ (‘#acc_sel_port’).html(accStr); //$ (‘#mcpcp_addportfolio .form_field, .form_btn’).removeClass(‘disabled’); //$ (‘#mcpcp_addportfolio .form_field input, .form_field select, .form_btn input’).attr(‘disabled’, false); // //if(call_pg == “2”) //{ // adtxt =’ Scheme added to your portfolio We recommend you add transactional details to evaluate your investment better. x‘; //} //else //{ // adtxt =’ Stock added to your portfolio We recommend you add transactional details to evaluate your investment better. x‘; //} //$ (‘#mcpcp_addprof_info’).css(‘background-color’,’#eeffc8′); //$ (‘#mcpcp_addprof_info’).html(adtxt); //$ (‘#mcpcp_addprof_info’).show(); 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Federal Bank shares edged higher intraday on January 4. The stock is in focus after Motilal Oswal retained its buy rating on the stock. The scrip was trading at Rs 88.05, up Rs 0.85, or 0.97 percent, at 11:26 hours. It has touched an intraday high of Rs 88.90 and an intraday low of Rs 86.90.
Motilal Oswal has maintained its buy call on the stock with a target of Rs 130 per share, an upside of 48 percent from the current market price.
Federal Bank posted a strong business recovery despite a challenging environment amid the pandemic. According to the Motilal Oswal research report, the bank’s gross advances rose about 12.1 percent year-on-year to Rs 1,40,000 crore and reported a strong sequential growth of 4.6 percent in the third quarter of FY22 compared with 3.4 percent quarter-on-quarter growth in the second quarter. The brokerage firm believes the growth was led by healthy traction across all segments.
Federal Bank’s total deposit base grew 8.5 percent year-on-year (2 percent on a quarterly basis) to Rs 1,75,000 crore. Total customer deposits rose 8.7 percent on-year (1.1 percent quarterly), while CASA deposits witnessed strong traction and rose 15 percent over the previous year (3.5 percent sequentially). Accordingly, CASA ratio improved 52 basis points quarter-on-quarter to 36.7 percent, the highest level achieved by the bank. Conversely, term deposit growth was broadly flat sequentially (-0.2 percent sequentially), the report said.
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“Certificate of deposit/interbank deposits posted a sharp sequential increase of ~65 percent/~21 percent, respectively, in 3QFY22. Liquidity Coverage Ratio (LCR) declined sharply to 154 percent in 3QFY22 from 231 percent in 2QFY22 indicating deployment of excess liquidity that the bank was carrying,” the report added
CASA trends remained healthy, with the liability franchise holding up well for the bank. LCR ratio, though witnessing a sharp decline, is likely to have supported the loan growth. The brokerage expects an improvement in margin in 3QFY22, underpinned by a recovery in credit trends and lower cost of funds.
Motilal Oswal has a target price of Rs 130 (1.3 times Sep’23E ABV (adjusted book value) for core banking.
Research firm Sharekhan has also maintained a buy rating on the stock with a target of Rs 139 per share, an upside of 57 percent from the current level. “Post the recent correction of 24 percent from its peak, Federal Bank’s valuations have turned attractive at 0.8x its FY2023 estimated book value. The bank is better placed as compared to mid-size private sector banks in terms of granular liability franchise, a well-diversified loan book, and capital positioning. Moreover, the bank is way ahead of its peers in terms of digitisation and fintech landscape,” it said.
Angel One has picked up Federal Bank as a buy with a target at Rs 135 per share, an upside of 53 percent from its current level. The brokerage firm is of the view that the bank is one of India’s largest old-generation private sector banks with total assets of Rs 1.9 lakh crore, with deposits of Rs 1.56 lakh crore and a loan book of Rs 1.2 lakh crore in FY21. Non-performing assets (NPAs) have remained steady for the bank over the past few years with gross ratio for Q3FY21 at 3.38 percent, while NET NPA ratio stood at 1.14 percent. Provision coverage ratio at the end of Q3FY21 stood at ~67 percent which Angel One believe is adequate.
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