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ICICI Securities Report
The Federal Bank Ltd. has revised some fees and charges upwards in various banking services, effective October 01, 2020, to ensure further balance stickiness, discipline and realigning with market dynamics.
Key changes in liability related charges include -
1. Charges on non-maintenance of average monthly balance revised upwards by 20/48%;
2. account closure charges (if closed between six month to 12 month – which no bank charges) revised further to Rs 100-300 versus Rs 50-100 earlier and
3. locker charges revised upwards in the range of 8-13%.
We see two-fold effect of this development -
Firstly, it would further strengthen the liability franchise with improved balance stickiness and discipline.
Secondly, it supports traction in non-interest income particularly from services (currently contributes approximately 25% to core fee income, up from approximately 20% since last revision in charges in September 2019).
Strength and resilience of its liability franchise reflects in 13 basis points improvement in deposit market share over past two years.
Valuations at 0.7 times FY22E offer favourable risk-reward.
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