Federal Bank: Only investors with risk appetite should consider the stock

June quarter results beat expectations, but nearly 12% of its loan book is not in receipt of even one installment

Federal Bank’s results in the quarter ended June 30 of financial year 2020-21 (Q1FY21) have many positives for investors, including good traction in deposits, lower moratorium book, and reduction in stressed assets.
 

Thus, the stock, which initially reacted negatively on Wednesday, gained 4.4 per cent on Thursday, outperforming the 1.2 per cent rise in the Nifty Bank index. However, a closer look at the bank’s moratorium book indicates potential risk to asset quality, which could put pressure on its financials and the stock.

Though the share of loans under moratorium in the overall loan book has reduced to 24 per