Federal Bank ends 12% down post Q2 earnings; brokerages' view neutral

Shares of Federal Bank slipped nearly 15 per cent in trade on Wednesday after the company reported a whopping 32.88 per cent fall in its net profit to Rs 161.28 crore in the September quarter, compared to Rs 240.30 crore during the same period of the previous fiscal year.

In intraday trade, the stock tumbled 14.67 per cent to Rs 55.80, on the Bombay Stock Exchange (BSE). The scrip closed at Rs 57.50, down 12.08 per cent.

Total income, however, increased from Rs 2,065.44 crore in the second quarter of last fiscal year to Rs 2,084.53 crore for the quarter ended September 30, 2015.

Net Interest Margins declined to 3.11 per cent as compared to 3.12 per cent in the June quarter and 3.35 per cent in the September quarter of last fiscal year.

Here is what brokerages say on the stock:

Edelweiss Securities

Federal Bank's performance over past few quarters was marred by tepid revenue momentum and volatile asset quality. However, with the bank incrementally focusing on building revenue momentum (ammunition in place with Tier-1 at 14% and strong liability franchise) along with a lower watch list suggests that a large part of the pain is over, though we would tread caution.

We maintain 'BUY/SO' with a target price of Rs 79.

Angel Broking

At the current market price (CMP), the stock is trading at 1.3x FY2016E ABV. We recommend NEUTRAL rating on the stock.