The Federal Bank stock surged almost 5% in intra-day trades on Monday after the lender reported a 163% year-on-year (y-o-y) rise in net profits to Rs 382 crore in Q4FY19. The rise in profits was led by controlled provisions and strong operational performance.
Gross advances grew 20% y-o-y to Rs 1.12 lakh crore as on March 31 led by 24% and 20% y-o-y growth in retail and corporate loans, respectively. Shyam Srinivasan, managing director and CEO, Federal Bank, gave a guidance of maintaining 20%-22% loan growth in FY20 as well while the analysts at Kotak Institutional Equities forecast 17% loan growth in FY20.
Gross non-performing assets (NPA) for the year ended on March 31 stood at 2.92% as as compared to 3% in the previous year. Net NPA fell to 1.48% for FY19 which was 1.69% a year ago. Analysts at Motilal Oswal said they are building further improvement as they do not see too many headwinds on asset quality.
The CEO said the performance of the bank on the slippage front along with disciplined recovery has contributed significantly towards meeting the objectives of Q3FY19. Recoveries for the quarter ending on March 31 were Rs 323 crore whereas new slippages were Rs 256 crore, 0.9% of the loan book.
“We have cut our credit cost estimate led by lower slippage ratio and higher recoveries,” said analysts at Jefferies. Analysts at Motilal Oswal said that with normalcy returning to its home state and slippages under control, asset quality was expected to improve further.
The current account saving account (CASA) ratio declined 110 bps y-o-y, during the quarter to 32%. Provisions declined nearly 50% y-o-y to Rs 178 crore from Rs 372 crore. The management expects negligible loss to its exposure of Rs 210 crore towards IL&FS as it is still a standard asset.