Federal Bank’s 3QFY17 results were better than our expectations. PAT growth of
26.4% YoY, with stable asset quality and accelerated loan growth were the key
developments during the quarter. After witnessing lot of stress in the loan book in FY16,
Federal Bank started showing improving in asset quality from the beginning of
FY17 and the trend still continues with stable asset quality. After a lackluster FY16
the results for FY17 looks better and the outlook for FY18 also is much better
now. At the CMP, the stock is trading at 1.5x it FY18 Adj BV. We have an
ACCMULATE rating on the stock and retain our target price of 85.