As the economy opened up, our efforts doubled. We had much recovery and upgrades than incremental slippage in Q2. Our quality of portfolio is getting as pristine as it should be.
Kerala-based Federal Bank reported a net profit of Rs 460.26 crore for the second quarter of the fiscal. The lender also reported higher net interest income and lower slippages. Excerpts from the post-result virtual press meet held by MD & CEO Shyam Srinivasan.
Fresh slippages are contained to Rs 320 crore for the quarter. Does that mean that the worst is over regarding the pandemic?
We have continuously fortified our capabilities and for years we have been fairly conservative as far as credit quality is concerned. In an improving environment, we will lead and in a falling environment we will fall the least. Given India’s level of vaccination and way of dealing with the crisis, I hope the worst is over.
Last quarter, we had much higher-than-normal run rate in slippages of Rs 640 crore because of one-and-a-half month of Q1 were non-functional. As the economy opened up, our efforts doubled. We had much recovery and upgrades than incremental slippage in Q2. Our quality of portfolio is getting as pristine as it should be.
What contributed to your profit this quarter?
Everything in the P&L works. Our interest income is Rs 1,479 crore, other income is Rs 444 crore, slippages is Rs 320 crore and provision is Rs 250 crore. We don’t have any lumpy one-off that makes things happen. It is a granular franchise.
What is your sense on the restructured book?
For our bank, a majority of the restructured book, nearly 90% or so, is secured. If you have secured book, then I think slippages is low. Mostly, these are housing loans and the probability of default is lower. Our slippage is lower than our recovery and despite that we have provided more on our standard assets, which includes our restructured book. We have created extra provision.
Opportunities are quite strong and we believe that the market is quite ready for growth. In the second half, we will see higher run rate than the first half.
Outlook on gold loan portfolio?
We remain very optimistic. In the first quarter, gold loans and gold prices saw a dip, but now have started stablising. We have grown 26% year to date (YTD) and we expect gold loans to grow 25-30% for the full year.
What is the share of gold loan to total advances and how much gold does the bank hold?
Gold loan is 11% of the total portfolio and the bank holds 49-50 tonne of gold in custody.
What is the update on the credit card issuance?
We had to stop issuance due to the Mastercard issue, but then within a month we were able to get Visa and then Rupay on board. We also have a partnership with FPL and now we are doing about 400-500 cards a day. We have a base of about 32,000 cards and an outstanding of about Rs 35 crore.