This Rakesh Jhunjhunwala holds Midcap Bank near 52-week high

on BSE, federal bank shares closed by 103 up 4.20 or 4.25%. Shares were near intraday high 103.20 each. Also, it was just a few bucks away from hitting its 52-week high. 107.65 each.

The market cap of the bank is 21,657.36 crores at present.

In one year, the bank’s shares have risen nearly 20% so far. These stocks were around on July 19 last year 86 level.

Rakesh who also manages his and wife Rekha Jhunjhunwala’s portfolio – has a cumulative holding of 7,57,21,060 equity shares or 3.65% in Federal Bank as on March 31, 2022. The bank is yet to announce its shareholding pattern for the June 2022 quarter.

According to the shareholding data on BSE, Rakesh Jhunjhunwala And Rekha Jhunjhunwala holds 2,10,00,000 equity shares or 1.01% in the bank. Besides this, Rakesh holds another 5,47,21,060 equity shares or 2.64%.

Considering today’s stellar performance, Jhunjhunwala’s wealth in Federal Bank rises 31.80 crore (7,57,21,060 X .) 4.20) in a single day.

In Q1FY23, Federal Bank reports strong growth of 64% in net profit 601 crore as compared to 367 crore in the same quarter last year. Net Interest Income (NII) up 13% to 1,605 crore 1,418 crore in Q1FY22. Gross NPAs and Net NPAs declined from 3.50% and 1.23% in Q1 FY2012 to 2.69% and 0.94% respectively.

As on June 30, 2022, the bank’s gross advances reached from 1,54,392 crore 1,32,787 crores over Q1FY22 – registering a growth of 16%. Meanwhile, deposits registered a growth of 8% 1,83,355 crore in Q1FY23 from 1,69,393 crore as of 30 June 2021.

Should you buy Federal Bank shares?

Ajit Kumar Kabi, an analyst at LKP Research, said, “Federal Bank has reported 1QFY23 earnings in line with our expectations and there are positive signs: a) improvement in the NPA ratio (GNPA: 2.69% versus 2.8% in the previous quarter), but Behind every impact of higher credit growth, b) restructuring pool flat with 21% coverage, c) strong NII growth with 6 bps expansion in NIM (13% YoY and 5% QoQ), d) provisioning with stable PCR Credit growth was better than expected growth in expense, e) 17% YoY and 4.7% QoQ, and e) reached quarterly profit 6 billion for the first time with an ROA above 1%. However, the disappointments are 1) high slippage ( 4.4 billion v/s 3.6 billion in 4QFY22), and 2) lower other income due to weak treasury and foreign exchange earnings. The credit quality of the bank is under check and there is no major hurdle.”

However, Kabi said, “Business growth will be majorly monitorable in the coming quarters as management has directed 15% credit growth for FY23. Continued growth drives re-rating with valuations exceeding 1.0x book value.” can.”

“We believe asset quality is likely to remain stable with gradual improvement in profitability. We have incorporated stable provisioning requirements with steady growth in the balance sheet and thus ROA/ROE of 1.1% as of FY13 Expect to give /13% .Buy again with increased target price of 124 (based on 1.1x FY24E Adj. BVPS); Potential increase of 25%,” Kabi said.

Yuvraj Choudhary, Research Analyst and Sagar Rungta, Research Associate, Anand Rathi said, “The C/I ratio improved to 721bps due to higher margins and lower OPEX. RoA improvement due to strong operating performance and benign credit cost (41bps) Asset quality was stable as slippages were in line with expectations. With less stress formation than before, earnings recovery will be better. Considering the bank’s strong liability franchise and capitalization, it is likely to gain market share in the near term. We maintain our positive outlook on this with a target of Rs 120, rated at 0.9x P/ABV in FY24 book.”

Further, Renish Bhuva, Kunal Shah and Chintan Shah, Research Analysts, ICICI Securities said in their note, “Federal Bank (FB) maintained an ROA of >1% for the third consecutive quarter. Credit growth accelerates to 16% YoY in Q1FY23.” This is the result of management’s successful execution of its new business strategy that revolves around the expansion of new products, a focus on profitability and the synergy derived from fintech partnerships, while the bank franchise build-up and new business lines, assets In Q1FY23, incremental stressed asset creation (net NPA + STD. Restructured book + net SR) remained highly significant, falling to 2.22% versus 2.36% in Q4FY22. Further, the gross The range of slippage ratio (1.2% in Q1FY23) remains- bound around 1.1% (annualized) since Q2FY22, which speaks to FB’s strong asset franchise and business flexibility.”

“New products like CV/CE, Micro Loan, PL through BOOM contributed 3% to the total loan and the Management expects the incremental growth to be driven mainly by them. NIM increased 6bps QoQ to 3.22% And the bank expects it to remain at the same level. 3.25-3.27% in FY23. Considering higher credit growth in FY23E/FY24E and improving visibility on stability of >1% RoA, we maintain BUY on the stock

Unchanged target price of Rs 125. We are yet to unlock factoring-in value from any of the subsidiaries,” said the trio of ICICI Securities.

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