27 Jan , 2022 By : Kanchan Joshi
Federal Bank posted a 29% rise in net profit at Rs522 crore for the third quarter ended December 2021 as compared to Rs404 crore in the year-ago period. The private lender's net income interest (NII) in Q3 grew over 7% to Rs1,539 crore from Rs1,437 crore year-on-year (YoY).
“Lower provisions counterbalanced higher opex and lower non-interest income, which led to a sharp around 29% year-on-year (YoY) increase in Federal Bank’s Q3 earnings. Asset quality improved as slippages and restructuring were less than anticipated. With the lower formation of stress than earlier envisaged, recoveries in earnings would be better," said domestic brokerage and research firm Anand Rathi.
Given the bank’s strong liability franchise and capitalisation, it is set to gain market share in the near term. The brokerage maintains its positive view on Federal Bank shares with a Rs120 price target.
Federal Bank's asset quality improved as gross non performing assets (NPAs) for the third quarter stood at 3.06% from 3.24% quarter-on-quarter (QoQ). Its net NPA was at 1.05% versus 1.12% in the previous quarter. Healthy recoveries/upgrades and the sale to ARC resulted in an improvement in asset quality ratios.
“Federal Bank reported a healthy quarter, supported by lower provisions and a pickup in fee income. The bank’s liability franchise remains strong. Asset quality ratios also improved despite elevated slippage, supported by healthy recoveries/upgrades, while PCR remained stable at around 66%," said Motilal Oswal. The brokerage house has a Buy rating on the bank stock with a target price of Rs130 per share.
As per BSE shareholding pattern, Rakesh Jhunjhunwala and his wife Rekha Jhunjhunwala hold 2.64% and 1.01% stakes respectively in Federal Bank as of December 2021.