Citigroup maintains `Buy` rating on Federal Bank. Federal`s Q2FY10 profits were 20% below estimates largely due to asset delinquencies and higher loan-loss charges. Fundamentally, it was a mixed quarter with the gains offset by its continued high asset deterioration. Federal`s increasing loan losses overshadowed an otherwise good P&L - NIMs expanded 38 bps q-o-q and fee growth appeared to revive with a 20% q-o-q rise. Pre-provisioning profits increased 24% q-o-q. Federal`s loan growth increased sharply and management targets 25-30 % for FY10E - well above industry levels. Federal`s slippages have increased sharply and meaningfully increases its leverage to the macro outlook given its mid-market focused loan book. High coverage levels (83%) however, provide some downside cushion. Citigroup expects the stock to remain weak in the near term - however, the downsides will be limited given Federal`s : a) Large capital base (17% Tier 1 ratio); b) Niche positioning ; and c) Relatively inexpensive valuations (0.7x 1-year fwd P/BV) - the cheapest amongst Indian banks.
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but are the loan assets failure % worst in the industry and is tat the reason why the stock is valued worst among the banking stocks...i want to know the actual reason...if pls. someone could explain...
| NIFTY 
