We were right to hold Federal Bank
The stock surged 19% after beating expectations
Like most of the Indian banking sector Federal had a dismal Q4 showing in March as the RBI tightened NPA classifications. We had previously covered the bank and had predicted that this setback was temporary and it would show better performance on the back of reduced credit costs, lower slippages and continued credit momentum.
Today, Federal bank reported its Q1 results, with numbers well above estimates. Net profit had increased 25% YoY to Rs 262.71 crore while Gross Non Performing Assets was flat at 3% compared to the previous quarter.
Total advances went up by 24% to Rs 94,297 crore while slippages stood at Rs 461 crore (compared to Rs 872 crore last quarter).
The stock, which had fallen recently, recovered strongly on the news and closed at Rs. 88.3, a rise of 19%, marking its biggest intra-day gain since April 2017.
Given its asset quality, improving performance, and its expected acquisition of Madura Microfinance, we remain positive over Federal bank’s long term prospects.
About Federal Bank
Established in 1931 as the Travancore Federal Bank, Federal bank is a Kerala based lender offering retail and corporate banking, para banking (debit card, third party product distribution etc), treasury and foreign exchange through a network of 1252 branches across the country.
Federal Bank sells life insurance products since March 2008 through IDBI Federal Life Insurance Company Limited, a joint venture (with 26% stake) in association with IDBI Bank Limited and Aegeas. The company also offers retail loans under its fully-owned subsidiary, Fedbank Financial Services Limited.
The Federal Bank is part of Minance’s long-term Bloom portfolio. To know how we can help you with your investments, visit our website.
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