External broker reports(aggregated public sources), Motilal Oswal Financial Services Limited

Motilal Oswal

External broker reports(aggregated public sources)

Equity Bottom-Up

<p>RBI has approved the re-appointment of Mr. Shyam Srinivasan as MD and CEO for a period of three years, starting from 23rd Sep'21 till 22nd Sep'24. We see this as a positive development as it addresses a key overhang on the management continuity. Moreover the approval for three years has come at a time when the street was expecting RBI to grant only a one-year extension. On the asset quality front, the initial impact of COVID-19 was in check as FB has no big ticket accounts (over INR1b) in its watch list.</p><div class="content-highlight"><em>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.</em></div>

RBI has approved the re-appointment of Mr. Shyam Srinivasan as MD and CEO for a period of three years, starting from 23rd Sep'21 till 22nd Sep'24. We see this as a positive development as it addresses a key overhang on the management continuity. Moreover the approval for three years has come at a time when the street was expecting RBI to grant only a one-year extension. On the asset quality front, the initial impact of COVID-19 was in check as FB has no big ticket accounts (over INR1b) in its watch list.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

RBI approves re-appointment of Mr. Shyam Srinivasan for three years

Silver Point

Thomas J. Monaco

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

<p><strong><em>*Balance Sheet Contraction: </em></strong>Federal Bank (FB.IN) [Federal] provided an investor update for FY 1Q22 ahead of its detailed financial results due sometime later this month. Like HDFC Bank (HDFCB.IN), the highlights related to growth metrics in lending and deposits – both of which are contracting. In our view, this is likely a sign that management has come to the view that it must preserve capital; and</p><p><strong><em>*Credit Risk Likely Increased. </em></strong>No information was disclosed about credit quality. Given the acceleration in the increase of net new problem loans increase of 78.4% on an annualized basis at FY 4Q21 (from 67.4% during FY 3Q21) coupled with the challenges of India’s second COVID-19 wave and negative loan growth, it’s a pretty fair bet that credit has worsened. We also found that reserve cover is increasingly light by close to INR 84.5 bn  – nearly five years of bottom-line performance. Perhaps management will do the right thing in FY 1Q22 and reverse the loss provision decline.</p>

*Balance Sheet Contraction: Federal Bank (FB.IN) [Federal] provided an investor update for FY 1Q22 ahead of its detailed financial results due sometime later this month. Like HDFC Bank (HDFCB.IN), the highlights related to growth metrics in lending and deposits – both of which are contracting. In our view, this is likely a sign that management has come to the view that it must preserve capital; and*Credit Risk Likely Increased. No information was disclosed about credit quality. Given the acceleration in the increase of net new problem loans increase of 78.4% on an annualized basis at FY 4Q21 (from 67.4% during FY 3Q21) coupled with the challenges of India’s second COVID-19 wave and negative loan growth, it’s a pretty fair bet that credit has worsened. We also found that reserve cover is increasingly light by close to INR 84.5 bn  – nearly five years of bottom-line performance. Perhaps management will do the right thing in FY 1Q22 and reverse the loss provision decline.

Federal Bank – Capital Preservation Mode

External broker reports(aggregated public sources), Axis Direct

Axis Direct

<p>We maintain a BUY rating on the stock in the backdrop of attractive valuations and value it at 1.1x FY23E ABV to arrive at a target price of Rs 100.</p><div class="content-highlight"><em>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.</em></div>

We maintain a BUY rating on the stock in the backdrop of attractive valuations and value it at 1.1x FY23E ABV to arrive at a target price of Rs 100.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

<p>In its FY21 Annual Report, FB highlighted the progress it is making in strengthening the Balance Sheet and the focus it is laying on building its Gold loans portfolio, along with the newly launched Credit Card product. Higher focus is placed on leveraging its...</p><div class="content-highlight"><em>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.</em></div>

In its FY21 Annual Report, FB highlighted the progress it is making in strengthening the Balance Sheet and the focus it is laying on building its Gold loans portfolio, along with the newly launched Credit Card product. Higher focus is placed on leveraging its...Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Gold loans witnessing robust traction; business granularity improving

External broker reports(aggregated public sources), HDFC Securities

HDFC Securities

<p>We incorporate the recent equity infusion and revise our FY22/FY23E PAT estimates upwards by 1% each and maintain BUY with a revised TP of INR 98 (earlier INR 97). Federal Banks (FB) Annual Report 2020-21 reinforces a steady franchise that is gradually adding new guardrails (FinTech partnerships in white spaces and high-ROA businesses such as CVs, MFI and credit cards) to its conventional moats (granular deposits, strong underwriting architecture and a secular NR franchise). Despite conservative impairment recognition during the pandemic year, FB carries limited baggage, albeit with negligible provisioning buffers.</p><div class="content-highlight"><em>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.</em></div>

We incorporate the recent equity infusion and revise our FY22/FY23E PAT estimates upwards by 1% each and maintain BUY with a revised TP of INR 98 (earlier INR 97). Federal Banks (FB) Annual Report 2020-21 reinforces a steady franchise that is gradually adding new guardrails (FinTech partnerships in white spaces and high-ROA businesses such as CVs, MFI and credit cards) to its conventional moats (granular deposits, strong underwriting architecture and a secular NR franchise). Despite conservative impairment recognition during the pandemic year, FB carries limited baggage, albeit with negligible provisioning buffers.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Federal Bank (Annual Report Analysis): New guardrails under construction for new profit pools....

India

Federal Bank Limited operates branches and regional offices throughout India. The Bank offers a wide range of financial services, including merchant banking, international banking and foreign exchange, leasing facilities, money markets and agricultural advances. The Bank also provides lending for hi-tech agricultural and government sponsored schemes.

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Federal Bank (FB IN)

RBI approves re-appointment of Mr. Shyam Srinivasan for three years

RBI has approved the re-appointment of Mr. Shyam Srinivasan as MD and CEO for a period of three years, starting from 23rd Sep'21 till 22nd Sep'24....

Motilal Oswal

Federal Bank – Capital Preservation Mode

FEDERAL BANK: Federal recently highlighted FY 1Q22 growth metrics in lending and deposits – both of which are contracting. In our view, it appears...

Thomas J. Monaco

Company Update:Federal Bank

We maintain a BUY rating on the stock in the backdrop of attractive valuations and value it at 1.1x FY23E ABV to arrive at a target price of Rs 100.

Axis Direct

Gold loans witnessing robust traction; business granularity improving

In its FY21 Annual Report, FB highlighted the progress it is making in strengthening the Balance Sheet and the focus it is laying on building its...

Motilal Oswal

Federal Bank (Annual Report Analysis): New guardrails under construction for new profit pools....

We incorporate the recent equity infusion and revise our FY22/FY23E PAT estimates upwards by 1% each and maintain BUY with a revised TP of INR 98...

HDFC Securities

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