Federal Bank Q3 net decreases 8% on higher provisioning

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January 21, 2021 2:50 AM

Provision and contingencies for the quarter under review stood at Rs 421 crore, an Y-o-Y increase of 161% from Rs 161 crore provided in the year ago period. The bank recorded an operating profit of Rs 963 crore during the quarter, against Rs 743.82 crore in the same quarter last year.

The bank is likely to raise capital in the second half of 2021 and is also planning to come out with a credit card of its own.

Federal Bank on Wednesday reported an 8.3% year-on-year (Y-o-Y) decline in its third quarter net profit to Rs 404.10 crore, mostly because of higher provisioning for bad loans. The lender had reported a net profit of Rs 440.64 crore in the year-ago period and Rs 307.62 crore in the second quarter of the current fiscal.

Provision and contingencies for the quarter under review stood at Rs 421 crore, an Y-o-Y increase of 161% from Rs 161 crore provided in the year ago period. The bank recorded an operating profit of Rs 963 crore during the quarter, against Rs 743.82 crore in the same quarter last year.

Shyam Srinivasan, MD & CEO, said: “The bank continues its strong operating momentum despite external turbulence. This has helped the bank strengthen its balance sheet further. The growth in the net interest margin is encouraging given the challenging operating environment. Gold loan continues its golden run, and that is promising. Provisions have been increased substantially to absorb any unfavourable turn of events. Asset quality issues have been kept in check despite external headwinds.”

Gross NPA as a percentage improved from 2.99% to 2.71%, while net NPA improved from 1.63% to 0.60% on a Y-o-Y basis. The provision coverage ratio improved substantially from 45.30% to 77.10%.

However, if the bank had classified borrower accounts as NPA after August 31, 2020, the bank’s proforma gross NPA ratio and proforma net NPA ratio would have been 3.38% and 1.14%, respectively, sources said. The Kerala-based lender said at the end of the December 2020 quarter, total deposits stood at Rs 161,670 crore, compared with Rs 144,592 crore in the year-ago period.

Advances at the end of Q3 stood at Rs 128,174 crore, compared with Rs 120,861 crore in the third quarter of the last fiscal. Gold loans registered a growth of 67.26% YoY and 16% QoQ.

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