Federal Bank gains as Street cheers sharp rise in net profit boosted by decline in bad loans

Federal Bank, NSE: FEDERALBNK, stock gained on Monday as investors' sentiment turned positive following the robust second quarter earnings. The bank reported a 52.89 per cent jump in its standalone net profit at Rs 703.71 crore, aided by fall in provisions for bad loans. 

The stock made an intraday high of Rs 132 on the NSE, advancing more than 1 per cent. At 1:45 PM, the stock was seen holding the gains as it quoted a price of Rs 131.20 apiece on the NSE and Rs 131.05 on the BSE. 

According to the bank, its total income on the standalone basis during the July-September quarter of 2022-23, rose to Rs 4,630.30 crore from Rs 3,870.90 crore in the same period of 2021-22, Federal Bank said in a regulatory filing.

The south-based lender had posted a net profit of Rs 460.26 crore in the year-ago period.

On the asset quality front, the lender reported an improvement as the gross non-performing assets (NPAs or bad loans) fell to 2.46 per cent of the gross advances as of end-September 2022 from 3.24 per cent by end of September 2021.

In absolute terms, the gross NPA stood at Rs 4,031.06 crore, as against Rs 4,445.84 crore. The net NPAs fell to 0.78 per cent (Rs 1,262.35 crore) from 1.12 per cent (Rs 1,502.44 crore).

Provisions for bad loans and contingencies for September 2022 quarter came down to Rs 267.86 crore, as against Rs 292.62 crore parked aside for the year-ago period.

Brokerages have revised their targets for Federal Bank share:
Morgan Stanley: Overweight rating. 

Price Target- Rs 155 to Rs 165 

BofA
Price Target- Rs 160 

Federal Bank stock has delivered a stellar return of 35 to its investors in the past 6 months. The counter has gained more than 50 per cent year-to-date. Federal Bank stock 52-week range is Rs 132.70 - Rs 78.60.

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