Federal Bank - Q1FY21 First Cut - ICICI Securities

(CMP - Rs. 50, MCap - Rs. 9932 crore)

Federal Bank reported a steady set of Q1FY21 numbers wherein lower provisioning led to healthy PAT growth. Moratorium witnessed reduction with asset quality remaining steady, as estimated.

Q1FY21 Earnings Summary

- As on July 12, 2020, Net moratorium book (excluding gold loans/loans against liquid securities) of the bank stood at 24% as against 35% on 25th May 2020 led by reduction in the retail moratorium book. Total provisioning for the quarter slumped to Rs. 395 crore (~32 bps of advances) which includes Covid-19 provisioning of Rs. 93 crore (RBI requirement of Rs. 30.3 crore). Outstanding contingent provisioning stand at Rs. 186 crore. PCR for Q1FY21 was 58.54% vs 53.39% in Q4FY20

- On the asset quality front, overall slippages came in at Rs. 184 crore, primarily due to recognition of a large corporate turning NPA. Total exposure to the aforesaid corporate account stands at Rs. 174 crore and the bank has completely provided for the NPA corporate account in Q1FY21. The bank has also created a standard asset provision of Rs. 37 crore for an expected haircut in another large corporate account. GNPA inched up by 12 bps QoQ to 2.96% with absolute GNPA at Rs. 3656 crore. On the back of standstill asset classification norms, NNPA came in a tad lower at 1.22% vs 1.31% in Q4FY20 and 1.49% in Q1FY20

- NII came in Rs. 1296 crore, up ~12.3% YoY largely due to steady margins and stable credit growth. In terms of operational performance, lower opex was offset by decline in fee income which made overall operational performance to remain steady. Accordingly, operating profit stood at Rs. 932 crore, up 19% YoY. Margins improved 3 bps QoQ to 3.07% due to steep decline in CoF. On the back of lower provisioning, the bank reported a profit of Rs. 400 crore, up 4.3% YoY

- On the back of Covid led lockdown, advances growth decelerated to 8.5% YoY to Rs. 123437 crore with corporate book declining 1.5% QoQ to Rs. 49375 crore. Deposit growth was healthy at ~16.9% YoY to Rs. 154938 crore, led by growth in term deposit. CASA ratio improved by 58 bps YoY to 32.02%. NRE deposits for the quarter was resilient at Rs. 60274 crore, up 18.6% YoY

- Overall provisioning looks lower to withstand delinquency shocks post moratorium period. However, the bank intends to scale up provisions, going forward.

We would be coming out with a detailed report soon.

Shares of FEDERAL BANK LTD. was last trading in BSE at Rs.49.85 as compared to the previous close of Rs. 51.1. The total number of shares traded during the day was 2005084 in over 4382 trades.

The stock hit an intraday high of Rs. 53 and intraday low of 49.35. The net turnover during the day was Rs. 102350032.

Source : Equity Bulls

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