Federal Bank Q1FY17 Result Update Research Report From Sharekhan

Federal Bank has posted decent set of numbers during Q1FY2017 and the strong uptick in advances book is a positive sign. The liability franchise of the bank has seen continuous improvement, with the CASA ratio rising to 32.8% (up 36BPS QoQ and 156BPS YoY). This would help the bank to reduce its cost of funds. Although the overall asset quality picture seems to be improving post the RBI’s AQR in FY2016, few accounts from the restructured category would require close scrutiny. The stock currently trades at 1.1x FY2018E BV, which is attractive. We maintain our Buy rating on the stock with a revised priced target of Rs74.