Our retail portfolio grew about 25%. Home loans, loans against property, auto loans, personal loans all are doing well. Business and auto loans are very small in the base as yet but the rate of growth is significant.
Federal Bank has facilitated a cautious lending approach, given the heightened risk in the external environment which has led to the granular and high quality retail loan book growth, Shyam Srinivasan, MD & CEO, told reporters while announcing the June quarter results.
You said you have been watchful of lending to the stressed sectors. What are these stressed sectors for the bank and how are you dealing with that?
Sectors which are stressed are already in public knowledge. In any segment, there are both good and bad performers, therefore, we have to be mindful of that. We are growing market share quite widely; this demonstrates the fact that we are picking up the right client while holding asset quality. We made an extra prudent provision for potential challenges that may arise.
In the last quarter, you said you have exposure to IL&FS. Any update on those assets?
In the March quarter, we had three, all running exposures to their SPVs. Two of them turned NPAs in the June quarter. However, we had made provisions for them. Another account is yet standard, for which we increased the provisions from 7.5% to 10%. There was a court order that those assets couldn’t be classified as NPAs, otherwise they would have slipped in Q4FY19, though we made a disclosure in the previous quarter. We had made prudential provision for them. The two accounts that slipped have very less exposure, `30 crore and `2 crore out of the total `240 crore.
One account is standard; is it because of the court ruling or something else?
No, it is still standard because it is being serviced. It has not become a 90-day passed asset. The third account is likely to be upgraded to green.
How much exposure do you have to DHFL?
I won’t take an account. Yes, there are some exposures to some of the names that are in the market but the account is standard. We guided for a 60 basis points credit cost in FY20 and we are well within that line.
What is the aggregate exposure to the HFCs and NBFCs? How has it changed from the March quarter in the June quarter?
It is almost flat. Almost 13% of our book is HFCs and NBFCs and there has not been any growth in these segments. They all are highly rated and trusted. We have a very large player, running a very large exposure. In certain instances, where there was an opportunity to exit, we have done that while continuing with the best in the class NBFCs.
What are the sectors you are keen to lend to?
I resist talking about sectors because I believe in names that are good, as part of our credit filters. We are not saying ‘no’ to anyone but anything that is long tenure in the project finance, we are trying to avoid.
Are you planning to buy any NBFC portfolio?
We will surely evaluate if anything comes through. We are not looking at lumpy transactions, we can do Rs 100 to Rs 150 crore. If we come across high quality book of, lets say, Rs 2000 crore, than there is a price to it, then we will have to trade off. It depends on our risk appetite. We have done one transaction of Rs 150 crore in the June quarter as well.
How much has your retail portfolio grown in the June quarter and what has been the growth in vehicle financing considering the sector is in a bit pressure?
Our retail portfolio grew about 25%. Home loans, loans against property, auto loans, personal loans all are doing well. Business and auto loans are very small in the base as yet but the rate of growth is significant. Core retail loan book is now about `32,000 crore, of which the auto loan book is around Rs 4,000 crore.
Any impact of auto sector slowdown on your business?
We are a very low share player. I do not see any impact as yet because we are picking share. As long as we are risk appetite on certain sector, I don’t see slowing down on these segments. Cumulated of personal loans and auto loans is less that 5% of the total loan book.
What credit-deposit (CD) ratio are you working with right now?
We currently are at 84%. Typically, we try to keep it between 82 to 85%, as it gives us a liquidity cushion. In Q4FY19, it reduced a bit more as we made some issuances in the last week of March.
Any exposure to the commercial realty developers?
The total realty developers’ loan book is very insignificant and would be less than Rs 100 crore.
What is the cost of funds and how much is the bank yielding on the advances? Is bank working on improving these?
Deposit cost in the market is very volatile. Yields for the June quarter have moved up nicely while our cost of funds rose moderately. Chances of cost of funds improving from here are quite high. We had 12 bps increase in yield on advances while we had only 3 bps rise in cost of funds in the June quarter. Cost of funds stands at 5.97% now and yield on advances is 9.80%.