Federal Bank net falls 21% year-on-year as provisions increase

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Published: May 29, 2020 12:15 AM

Federal Bank’s net profit for the March quarter fell 21% year-on-year (y-o-y) to Rs 301 crore as it set aside Rs 567.5 crore in provisions, 161% higher than in the same period a year ago.

Of the total provisions, Rs 93 crore was towards expected stress from Covid-19 and lockdown.

Federal Bank’s net profit for the March quarter fell 21% year-on-year (y-o-y) to Rs 301 crore as it set aside Rs 567.5 crore in provisions, 161% higher than in the same period a year ago. Of the total provisions, Rs 93 crore was towards expected stress from Covid-19 and lockdown.

The bank said 35% of its customers by value have availed the repayment moratorium as on May 25. Shyam Srinivasan, managing director & CEO, Federal Bank, said it is yet unclear if the number of applicants will increase now that the breather has been extended by another three months to the end of August. “We will know only in June,” Srinivasan said, adding, “My sense is it may go up a little, but not materially.”

As a share of segmental advances, Federal Bank saw the largest incidence of the moratorium being availed in the business banking category, where 73% of all advances are now under the standstill. In the commercial banking segment, 53% of advances, 38% of retail advances, 31% of agri loans and 20% of corporate advances were under moratorium as on May 25. The bank has extended the benefit of the standstill to special mention account (SMA)-2 borrowers with a total outstanding of Rs 303 crore.

Federal Bank’s net interest income (NII), the difference between interest earned and interest expended, grew 11% y-o-y to Rs 1,216 crore. Its net interest margin improved 4 basis points (bps) sequentially to 3.04% in Q4FY20. The bank’s gross advances grew 11% y-o-y to Rs 1.24 lakh crore as on March 31, 2020. Deposits grew 13% y-o-y to Rs 1.52 lakh crore and the current account savings account (CASA) ratio fell 165 bps y-o-y to 30.5%.

Srinivasan said the bank is seeing loan growth in some pockets, such as gold loans, even after the lockdown. “We have seen good growth in gold loans. Cross-sell to existing customers will continue. Opportunistically, some good corporate assets will grow, but traditional products like retail, home loans, loans against property will see some slowdown in some areas,” he said.

The bank’s asset quality improved, with the gross non-performing asset (NPA) ratio falling 15 bps sequentially to 2.84% and the net NPA ratio down 32 bps from the end of December to 1.31%. Federal Bank’s shares closed at Rs 42.75 on the BSE, up 4.27% from their previous close.

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