Buy Federal Bank, target price Rs 125: ICICI Securities

ICICI Securities has buy call on Federal Bank with a target price of Rs 125. The current market price of Federal Bank Ltd. is Rs 104.6. Time period given by analyst is one year when Federal Bank Ltd. price can reach defined target.

Federal Bank Ltd., incorporated in the year 1931, is a banking company (having a market cap of Rs 21834.73 Crore).
Federal Bank Ltd. key Products/Revenue Segments include Interest & Discount on Advances & Bills, Income From Investment, Interest On Balances with RBI and Other Inter-Bank Funds and Interest for the year ending 31-Mar-2021.



Financials
For the quarter ended 30-09-2021, the company reported a Consolidated Total Income of Rs 4013.46 Crore, down -3.24 % from last quarter Total Income of Rs 4147.77 Crore and down -2.85 % from last year same quarter Total Income of Rs 4131.32 Crore. The bank reported net profit after tax of Rs 499.42 Crore in latest quarter.


Investment RationaleMore than 50% of new liability accounts booked in Q2FY22 was sourced via various fintech partnerships. Management’s encouraging asset quality narrative (collections at 96%, SMA pool at <4%, credit cost estimate of ~70bps), strong liability franchise, focus on high- yielding products like CC, MFI, etc. for incremental growth, and fintech tie-ups would help the bank improve its RoA in FY22E/FY23E. Considering the improving visibility on FB crossing 1% RoA by FY23E, the brokerage maintains BUY on the stock with a revised target price of Rs125 (earlier: Rs100), valuing it at 1.3x vs 1.1x earlier.

Promoter/FII Holdings
Promoters held 0 per cent stake in the company as of 30-Sep-2021, while FIIs owned 25.92 per cent, DIIs 42.54 per cent.