Kerala-based Federal Bank reported a net profit of Rs 521.73 crore in the third quarter of the fiscal, which is a year-on-year increase of almost 29%. The lender also reported higher net interest income and lower slippages for the quarter. Excerpts from a post-result virtual press meet held by Shyam Srinivasan, MD & CEO of Federal Bank, and the top management.
How do you review the third quarter?
The bank continues to make good progress and credit quality is quite robust. The main callouts for the quarter are that for the first time, we crossed the Rs 500 crore mark in net profits , which helped deliver RoA of +1. Income also crossed Rs 2,000 crore for the quarter. CASA ratio is at an all-time high of 36.68%.The bank made a strong comeback in the corporate book in the third quarter … I will characterise Q3 as a strong quarter built on strong fundamentals.
Could you elaborate on the growth in the corporate book and the outlook?
As we exited CY21, we saw corporates turning to banks for growth and expansion as the alternate sources of money, which was cheaper, started normalising. We are well-positioned to lend to good corporates and we are very competitive. The book is share-picked. We believe that going forward in CY22 as the economic activities pick up and with capex happening we will have opportunities to lend. We grew sequentially by 7% and we believe 15-20% growth is possible if the sustained momentum in the economy continues.
What is the progress in the gold loan portfolio?
The gold loan book was pretty much flat or de-grew for the first six months with gold prices falling. Thankfully, it picked up in Q3 and we grew around 3% … Last year was exceptional for gold loans and we grew 70% y-o-y. We think gold loan growth will be meaningful, but certainly not high at 30-40%. This year’s growth will be close to 10% and next year in the mid-twenties.
What is the update on the credit card issuance?
We had to stop the issuance in July due to the Mastercard issue, but then within five-six weeks, we were able to get Visa and then Rupay on board. The business is doing well. We have a good pre-approved base. For the new to bank proposition, we also have a partnership with fintech FPL and we are clocking a good rate of growth and our outstanding is growing up. Our spends are higher than the industry average.
How many accounts have you added through the fintech platforms?
We have two partnerships on saving bank accounts: Fi and Jupiter. Between them, we are clocking 13,000-14,000 accounts per day, which is 3-3.5x of what we normally do through organic sourcing. The profile of the customers is digitally native salaried millennials who are willing to and able to experiment with the digital technologies the platforms provide. Various cross-sell opportunities will also present as the portfolio matures.
Do you foresee any impact from the third wave?
It is early to tell, but then there was a slowdown of activities in the last two weeks of December and the first two weeks of January. But then again, this period — year-end and year-beginning — tends to be slow in activities … Usually, in collections, it is the last four weeks of the quarter that matter. So if the third wave starts slowing by January-end, the economic consequence may not be very severe. There are health and productivity challenges, but I am reasonably optimistic that by the end of January and early February this will start moderating.