Federal Bank Q4 net jumps 58% as provisions decline

Federal Bank on Monday reported a 58 per cent jump in its consolidated net profit to Rs 521.24 crore for the March 2021 quarter, as money set aside for loan losses decreased due to upfront provisioning earlier.

On a standalone basis, the private sector bank's net profit for the quarter also increased by 58 per cent to Rs 477.81 crore, while the same for the entire fiscal came at Rs 1,590 crore as against 1,542 crore.

Its managing director and chief executive Shyam Srinivasan told reporters that the first quarter of the new fiscal (April-June 2021) will be challenging for the business and its operations, following the impact of the second wave.

The bank expects the new fiscal to play out similar to the one before and things will improve as the year proceeds on, Srinivasan said, without giving guidance on the credit growth for the new fiscal.

Its core net interest income (NII) grew 17 per cent to Rs 1,420 crore on credit growth of 9 per cent and a 0.19 per cent widening in the net interest margin at 3.23 per cent.

The other income dipped to Rs 465 crore as against Rs 711 crore in the year-ago period, largely because of a Rs 180 crore gain on investments booked in the year-ago period.

The bank overall provisions and contingencies came at Rs 242 crore, less than half of the Rs 567 crore in the year-ago period and Rs 420 crore in the preceding March quarter.

Srinivasan said the bank had provided money for doubtful loans since the onset of the pandemic in an accelerated fashion, even while they were classified as standard assets on the books during the period of moratorium. With the clarity provided by the Supreme Court, the gross non-performing assets ratio increased to 3.41 per cent as against 2.84 per cent in March 2020, but the provisions did not.

The official said the money was transferred from standard assets provisioning to credit provisioning with the recognition of the bad loans, which resulted in a dip in provisioning for the quarter.

The overall slippages in FY21 were almost the same as FY20 at over Rs 1,800 crore but the bank set aside Rs 1,500 crore in provisions against such assets in FY21 as against Rs 1,000 crore in the fiscal before.

The bank will target to maintain the provision coverage ratio at 65 per cent, he said.

Srinivasan said the bank will continue to set aside money as and when it sees stress building up in the book as part of regular business operations, and added that it has received loan recast requests of Rs 100 crore from small businesses in April.

When asked about requests received under a new scheme for small borrowers announced earlier this month, Srinivasan said it will typically take time for borrowers to come forward.

A 70 per cent jump in the gold loan book was a key driver for credit growth in FY21, even as loans to corporates contracted by over 5 per cent, Srinivasan said, adding that the bank is targeting an increase of 25-30 per cent in the gold loan book in FY22.

The bank facilitated remittances of over Rs 1 lakh crore into the country in FY21 as against Rs 92,000 crore in the previous fiscal, which is the highest ever achieved by it, he said.

Its overall capital adequacy inched up to 14.62 per cent as of March 31, 2021, from 14.31 per cent in December 2020, making it the only lender to expand its buffers without an infusion.

Srinivasan, who has spent over a decade at the helm already, said the board is keen for him to continue and the bank has written to the RBI for an extension.

The bank scrip gained 2.45 per cent to close at Rs 81.65 apiece on the BSE, as against a 1.74 per cent gain on the benchmark.