Federal Bank revenue growth decelerated to 12.2% in FY2018 vs. 14.3% a year earliner

09 May 2018 • About Federal Bank ($FEDS) • By InTwits

Federal Bank reported FY2018 financial results today. Here are the key drivers of the company's long term financial model:

Federal Bank has low CAPEX intensity: 5 year average CAPEX/Revenue was 1.3%. At the same time it's a lot of higher than industry average of 1.8%.
CAPEX is quite volatile: ₹0m in FY2018, ₹2,440m in FY2017, ₹953m in FY2016, ₹9,475m in FY2015, ₹12,853m in FY2014
The company has potentially unprofitable business model: ROIC is 4.6%
It operates with medium-size leverage: Net Debt/EBITDA is 0.6x while industry average is

Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.

Revenue and profitability

The company's Revenue jumped on 12.2%.

Net Income margin showed almost no change in FY2018.

Investments (CAPEX, working capital and M&A)

In FY2018 the company had CAPEX/Revenue of 0.86%. CAPEX/Revenue decreased slightly on 0.57 pp from 1.4% in FY2015 to 0.86% in FY2018. It's average level of CAPEX/Revenue for the last three years was 1.2%. During the last 5 years CAPEX as a % of Revenue topped in FY2016 at 1.9% and was declining since that time.

Return on investment

The company operates at low ROIC (4.6%) and ROE (8.8%). ROIC decreased slightly on 1.5 pp from 6.1% to 4.6% in FY2018. ROE decreased slightly on 1.4 pp from 10.2% to 8.8% in FY2018.

Leverage (Debt)

Debt jumped on 99.4% while cash jumped on 12.2%.

The company has no short term refinancing risk: short term debt is zero.

Financial and operational results

FY ended 31 Mar 2018

Federal Bank ($FEDS) key annual financial indicators

mln. INR	2014	2015	2016	2017	2018	2018/2017
P&L
Revenue	91,178	84,473	86,346	98,670	110,751	12.2%
Net Income	8,497	10,578	4,864	8,669	9,354	7.9%
Balance Sheet
Cash	31,084	33,820	37,770	45,783	51,368	12.2%
Short Term Debt	228	25,361	6,547	0	0
Long Term Debt	57,675	23,930	52,456	63,523	126,670	99.4%
Cash flow
Capex	1,226	1,211	1,611	950	956	0.6%
Ratios
Revenue growth	31.9%	-7.4%	2.2%	14.3%	12.2%

Net Income Margin	9.3%	12.5%	5.6%	8.8%	8.4%	-0.3%
CAPEX, % of revenue	1.3%	1.4%	1.9%	1.0%	0.9%	-0.1%

ROIC			4.7%	6.1%	4.6%	-1.5%
ROE	12.9%	14.5%	7.3%	10.2%	8.8%	-1.4%

Peers in Banks

Below we provide Federal Bank benchmarking against other companies in Banks industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.

Top companies by Revenue growth, %


Top 5	FY2014	FY2015	FY2016	FY2017	FY2018
Halyk Savings Bank Of Kazakhstn JSC ($HSBK)	16.3%	19.5%	16.4%	59.5%
Zenith Bank ($ZENB)		6.8%	17.9%	46.7%
Commercial Intl Bank(Egypt)S.A.E ($CBKD)	18.9%	26.8%	27.0%	46.4%
TCS Group Holding ($TCS)	11.5%	10.6%	34.0%	33.7%
Kazkommertsbank JSC ($KKB)	16.3%	41.4%	-1.4%	31.8%
Median (42 companies)	11.1%	4.0%	3.9%	4.2%	1.5%
Federal Bank ($FEDS)		-7.4%	2.2%	14.3%	12.2%

Top companies by CAPEX/Revenue, %


Top 5	FY2014	FY2015	FY2016	FY2017	FY2018
Lloyds Banking Group ($LLPC)	13.1%	13.6%	14.5%	14.5%
Banco Santander Sa ($BNC)	8.9%	10.2%	9.1%	10.0%
Bcb Hldgs Ltd ($BCBW)	5.4%	2.5%	3.0%	7.3%
Royal Bank Of Scotland Group ($RBS)	4.1%	4.6%	5.6%	7.1%
Diamond Bank ($DBPA)	6.0%	6.7%	6.2%	7.0%
Median (38 companies)	2.1%	2.6%	2.5%	1.9%	1.5%
Federal Bank ($FEDS)	1.3%	1.4%	1.9%	1.0%	0.9%

Top companies by ROIC, %


Top 5	FY2014	FY2015	FY2016	FY2017	FY2018
TCS Group Holding ($TCS)	6.7%	3.4%	22.5%	31.8%
Commercial Intl Bank(Egypt)S.A.E ($CBKD)	30.1%	30.3%	28.0%	25.3%
Guaranty Trust Bank ($GRTB)	17.8%	16.0%	17.4%	18.3%
Sberbank Of Russia ($SBER)	4.8%	4.0%	9.4%	13.0%
Zenith Bank ($ZENB)	15.0%	11.2%	11.1%	11.4%
Median (42 companies)	4.4%	3.4%	4.5%	4.5%	0.2%
Federal Bank ($FEDS)			4.7%	6.1%	4.6%

Federal Bank stock price chart

Federal Bank financials

mln.	FY2010	FY2011	FY2012

Revenue	42,058	45,704	61,139
EBITDA	0.000	0.000	0.000
Net income	4,397	5,565	7,537
CAPEX	614.7	609.1	1,035
Debt	20,283	22,546	47,755
Cash	23,189	29,364	24,297

About Federal Bank

The Federal Bank Limited provides various banking and financial services for individuals, NRI and corporate customers, and SME-businesses in India. It offers savings accounts, current accounts, salary accounts, fixed deposits, cash certificates, and recurring deposits; gold, housing, car, property, educational or career, travel, cash, business, and agriculture and agriculture allied loan products; and loans against deposits, as well as overdraft facility against recurring deposits. The company also provides account, and fund and cash transfer services, as well as working capital finance, term finance, trade finance, specialized corporate finance, structured finance, and syndication services. In addition, it offers safe deposit lockers, NRI and value added services, online trading and depository services, e-commerce services, and value added services. Further, the company provides mobile banking, Internet banking, and ATM services; life and general insurance products; and mutual funds; debit, gift, and travel cards, as well as treasury products and services. As of March 31, 2014, it operated through a network of 1,174 branches and 1,359 ATMs. The company was formerly known as Travancore Federal Bank Limited and changed its name to The Federal Bank Limited in March 1947. The Federal Bank Limited was incorporated in 1931 and is headquartered in Aluva, India.