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Federal Bank: Strong Performance Backed by Better Credit Quality - Views on News from Equitymaster

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  • Oct 17, 2017 - Federal Bank: Strong Performance Backed by Better Credit Quality

Federal Bank: Strong Performance Backed by Better Credit Quality
Oct 17, 2017

Federal Bank declared the results for the second quarter of financial year ending March 2018 (2QFY18). The bank has reported 23.8% YoY and 31% YoY growth in net interest income and net profits respectively in 2QFY18. Here is our analysis of the results.

Performance summary
  • Net interest income grew by 23.8% YoY in 2QFY18 on the back of 24.5% YoY growth in advances.
  • NIMs were stable and increased sequentially by 18 bps to 3.31% driven by fund raise and a jump in CD Ratio.
  • Cost to income ratio improved marginally on YoY basis at stood at 50.8% in 2QFY18 compared to 52.4% in 2QFY7.
  • Gross non-performing asset (GNPA) as a percentage to advances declined sequentially to 2.39% from 2.42% in the preceding quarter. The net NPA as a percentage of advances also declined sequentially and stood at 1.32%. Provisioning increased marginally by 5% YoY. The Provision Coverage Ratio (including technical write-offs) stood at 70.32%
  • Due to strong growth in advances and improvement in credit quality, net profit grew by 31% YoY.

    Financial Snapshot
    Rs (m) 2QFY17 2QFY18 Change
    Interest income 20,663 23,796 15.2%
    Interest expense 13,401 14,807 10.5%
    Net Interest Income 7,262 8,989 23.8%
    Net interest margin (%) 3.31% 3.31%  
    Other Income 2,721 2,872 5.6%
    Operating Expenses 5,233 6,029 15.2%
    Provisions and contingencies 1,684 1,768 5.0%
    Profit before tax 3,065 4,064 32.6%
    Tax 1,053 1,427 35.6%
    Profit after tax/ (loss) 2,012 2,637 31.0%
    Net profit margin (%) 9.7% 11.1%  
    No. of shares (m)*   1,955  
    Book value per share (Rs)   60  
    P/BV (x)*   2.1  
    *Book value as on 30th September 2017
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