FEDERAL BANK LTD - Q2 FY18

FEDERAL BANK LTD reported strong & steady September quarter with PAT rebounding in double digits after de-growth in the previous June quarter. PAT stood at Rs. 2640 Mn compared to Rs. 2010 Mn same period previous year rising 31% YOY & 25% sequentially. Net Interest Income, difference between interest earned and expended was reported at Rs. 8990 Mn in the current quarter against Rs. 7260 Mn corresponding quarter previous year, expanding 24% YOY. Net Interest Margin was reported at 3.31% improving 18 B P QOQ with a fall of 1 basis point YOY in the current September quarter. Asset quality has also improved on yearly basis as GNPA & NNPA ratios declined 39 & 29 basis points in the current September quarter.  One basis point is 0.01%.  Gross NPAs as a percentage of Gross Advances was at 2.39% in Q2 FY18 against 2.78% same period previous year. Net NPAs as a percentage of Net Advances was reported at 1.32% in the current quarter against 1.61% same period previous year. Provisions & contingencies declined 25% sequentially and wwre reported at Rs. 1768 Mn vis-à-vis Rs. 1684 Mn in Q2 FY17. Wholesale or corporate segment reported 32% growth YOY leading the pack, followed by other banking business jumping 27% YOY. Retail grew 7% YOY and 2% sequentially whereas Treasury reported 3% rise on yearly basis with sequential negative growth of 8%. CASA ratio at 32.93% jumped 189 basis points YOY in September quarter. CASA deposits increased from Rs. 267870 Mn in Q2 FY17 to Rs 320160 Mn in the current September quarter, jump of 20% YOY. Other income or non interest revenue accounting 11% of the total income of the bank rose at 5% YOY at Rs. 2872 Mn against Rs 2721 Mn same period previous year. Advances moved at a higher rate of 25% whereas Deposits grew 13% YOY. Deposits stood at Rs. 972108 Mn with sequential growth of 1.43% whereas Advances rose 6% QOQ at Rs. 806459 Mn in Q2 FY18.  Cost income ratio of bank stood at 50.83% in the current quarter against 52.40% in the corresponding quarter previous year. Federal Bank with stable Net Interest Margin, growing NII and improving asset quality is marching towards sustainable growth for long term. We recommend BUY for medium and long term investment with a target price of Rs. 185.

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Name Of Research Analyst	Financial Exposure/Interest	Ownership
Suhani Adilabadkar	Nil	Nil
Relative	Owns Shares In the Company	Less than 1%