Federal Bank hits record high on strong Q4 results

Federal Bank  rallied 7% to Rs 115; also its record high on BSE in intra-day trade, after the bank reported a strong 2400% year on year (YoY) growth in net profit at Rs 257 crore for the quarter ended March 2017 (Q4FY17).  The bank had posted profit of Rs 10 crore in the year ago quarter.

Analysts on an average had expected profit of Rs 225 crore for the quarter from the private sector lender.

Net interest income (interest earned minus interest expended) grew 23% at Rs 842 crore during the quarter under review, against Rs 791 crore in the corresponding quarter of previous fiscal. Net interest margin improved by 11 basis points (bps) YoY and 10 bps sequentially at 3.42%.

The bank delivered an impressive asset quality performance, with gross non-performing assets (GNPAs) declining 12% QoQ in absolute terms (GNPA % down 44bp QoQ to 2.33%).

“Incremental slippages moderated to Rs 244 crore from Rs 273 crore in Q3 (annualized slippage ratio of around 1.7% – lowest in last eight quarters), led by lower slippages in corporate and retail. Strong recoveries/upgradations and sale to ARC of Rs 318 crore led to a decline in GNPAs,” analysts at Motilal Oswal Securities said in results update.

“We are enthused by Federal Bank’s core operating performance, driven by its strong balance sheet. We believe the bank is ahead of corporate lending peer banks on the asset quality curve. Considering asset quality distractions in the PSU space, we believe Federal Bank is well positioned to gain market share in highly rated corporates. The bank has board approval to raise Rs 2,500 crore, and in the event of capital raise, tier 1 (currently 11.8%) should be strengthened further,” the brokerage firm said mantaining ‘buy’ rating on the stock with target price of Rs 125.

At 11:17 am; the stock was up 5% at Rs 113 on BSE against 0.30% decline in the S&P BSE Sensex. The trading volumes on the counter almost tripled with a combined 36.3 million shares changed hands on BSE and NSE so far.