Excerpts from Kotak Securities Report on Federal Bank,
Recent discussion with the management and our study of Kerala shows an impressive performance of Federal Bank in mobilizing NR deposits. Its market share of 21% in NRI deposits is second only to State Bank of Travancore’s (24%) and has consistently increased from 15% in 2012. We are more concerned on the productivity of expanded branches outside Kerala. The bank grew its branch network aggressively between FY2010-13, but we are yet to see any improvement in the market share of loans or deposits in these regions.
We maintain our positive view with the target price at Rs 80 (unchanged) on Federal Bank and value it at 1.5X book and 12X FY2017E EPS for RoEs in the range of 13-14% and strong earnings growth of ~15-20% CAGR in the medium term.
