Federal Bank shares tank on results, look headed for new 52-week low

Last Updated: Thu, May 10, 2018 15:34 hrs
Federal Bank (Image Courtesy: Federal Bank)

Shares of Kerala-based Federal Bank plunged sharply today, with a dissapointing fourth quarter earnings report triggeing heavy selling at the counter.

The stock opened at Rs 93.10 on BSE, down 8% from its previous closing price, and drifted down to Rs 88.20 subsequently, very nearly falling to a 52-week low. Moving in a tight band till then, the stock still remains deep down in negative territory at Rs 89.90 with a loss of about 11.6%.

On BSE, the Federal Bank counter has clocked a volume of about 11.17 million shares today, as compared to average daily volume of just around 7.35 lakh shares. On the National Stock Exchange, the counter has clocked a volume of more than 118 million shares in the session.

Federal Bank announced after trading hours on Wednesday that it posted standalone net profit of Rs 144.99 crore in the January - March 2018 quarter, down 43.5% from a net profit of Rs 256.59 crore it had recorded in the year-ago quarter. Higher provisioning for bad loans contributed to the decline in net profit. Provisions increased by almost 200% (y-o-y) to Rs 371.53 crore in the fourth quarter.

Total income during the fourth quarter was Rs 2862.14 crore, as compared to Rs 2598.06 crore in the same period of the previous financial year. Provisioning for bad loans and contingencies increased to Rs 371.53 crore for the latest quarter as against Rs 122.70 crore set aside for the same purpose in the year-ago period.

For the year ended March 2018, the bank posted a net profit of Rs 878.85 crore, as against Rs 830.79 crore in the previous fiscal.

Net interest income of the bank was up 11% to Rs 933.22 crore from Rs 842 crore in the year-ago period. Net interest income grew by 17.37% from Rs 3052.65 crore in FY17 to Rs 3,582.81 crore in FY18. Net interest margin stood at 3.21% for FY18, the bank said.

The bank's gross non-performing assets rose to 3% of the gross loans as on March 31, 2018 compared with 2.33% as on March 2017.

Federal Bank Managing Director & CEO Shyam Srinivasan said the revised framework for resolution of stressed assets impacted the bank's bottom line figure. "This is as a result of our accelerated recognition of sensitive assets abiding by the spirit of the revised regulation on stressed asset resolution, which, I am sure, will go far to strengthen and professionalise the banking industry’s capabilities to manage stressed assets. Having turned the corner with respect to recognition of NPAs from the restructured standard book this Q4, the Bank is confident of meeting the expectations of its stakeholders and will start FY19 with significantly lower stress,” he added.

Several brokerages and analysts have cut the target price for the stock, although many of them still maintain a buy rating for it, saying asset quality pain is now behind and steady growth should result in steady NIMs and profitability.

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