Federal Bank reported utterly disappointing earnings for quarter ended 30^th June 2016, with net interest income contracting 3% QoQ to Rs. 605 crore, as both total income declined 5% to Rs. 2,107 crore while other income narrowed down to Rs. 194 crore, from Rs. 306 crore earned in Q4FY15. What came in as a bigger blow were spike in provisions to Rs. 153 crore for the first quarter alone, as against Rs. 106 crore provisions for the whole of last year i.e. FY15. Thus, Q1 net profit fell to Rs. 141 crore, down 50% QoQ and down 36% YoY. EPS for June quarter came in at Rs. 1.65.

This Kerala headquartered 1,247 branched bank also witnessed rising bad loans, with gross NPAs jumping to 2.59% (from 2.04% as of 31-3-15) and net NPAs at 0.98% (from 0.73% as of 31-3-15). Thus, all in all, Q1 was bad on all fronts. Efficiency came down, with cost to income ratio expanding to 54% from 50% in FY15, return on assets (RoA), already Federal’s being one of the lowest in the industry, shrunk even further to 0.70% while NIMs narrowed down to 3.12% from 3.31%  sequentially.

All this poor performance is reflected in the stock’s valuation too. At current BVPS of Rs. 92, share price is ruling at a 24% discount, despite being a private sector bank with CASA ratio of 30% plus. At PBV of 0.76x, this one of the few private sector banks available at the valuation of public sector banks. However, till profitability improves, signs of revival appear quite blur.