Provisioning is lower in Q4, because we have been provisioning significantly in the first three quarters without taking NPAs. As the NPA recognition came through in March, it shifted from standard asset provision to credit provision.
Federal Bank reported its highest-ever quarterly net profit of Rs 477.81 crore for the fourth quarter of FY21. It also reported a net profit of Rs 1,590.30 crore for the 2020-21 fiscal. Excerpts from a post-result virtual press meet held by Shyam Srinivasan, MD & CEO of Federal Bank.
Interest income is seen flat and other income has de-grown. Is the growth in net profit due to lower provisioning?
Other income of the bank has de-grown because in Q4 of FY20 we had a spectacular one-off sale of a portfolio investment. Provisioning is lower in Q4, because we have been provisioning significantly in the first three quarters without taking NPAs. As the NPA recognition came through in March, it shifted from standard asset provision to credit provision.
Could you share your outlook for the current quarter and fiscal?
It is hard to tell at this juncture. The current quarter does seem to be quite challenging. Q1 FY21 was challenging for all of us and things came back roaring later in the year. Last year, it began badly and ended up very decently. We have to believe that a similar occurrence will happen in this fiscal too. Our portfolio quality is good and our net NPA is 1.19%; there are only two-three banks that are better than us. So there is no reason we should suddenly see it adverse.
From which sector has loan growth come from?
Our loan growth was quite diversified and meaningful, except for our corporate loan book. Gold loan had the sharpest growth of 70%. Corporate loan book de-grow by almost 6%.
Many NRIs have lost jobs in the Middle East. What is the outlook on remittances, given that the bank has a good market share in total remittance into the country?
We had the finest year ever in terms of remittances. Total remittance crossed `1,06,000 crore in the last fiscal. We, as a bank, have gained market share over the years. There are many reasons for the growth in remittance. Rupee has depreciated with respect to the dollar, families have moved back to India, with the earning member still there and sending more money back. I think it is a temporary resettlement that is happening.
Any update on the credit card launch?
We are [introducing] our proprietary credit cards and we have gone live with cards for our staff … over 80% of our staff have been carded. Towards the end of this calendar [year], we will be live with our existing customers and then look outside.
What is your outlook on gold loan growth? There have been reports of gold auctions by banks.
Last year was quite sensational for us as we grew 70%. It continues to be an attractive business. That kind of growth rates are not possible both environmentally and based on our higher denominator. At this juncture, 25-30% growth is quite possible and that is what we are focusing on. I do believe that gold loans will pick up in June-July as other credit line starts choking.
Your tenure is coming to an end in September. Is there is any update on renewal?
I am eligible for a renewal; I am willing and so is my board. We have already applied. Our application with the RBI is pending and we will know in due course.