General
Synopsis
Federal Bank’s first-quarter net profit declined 15% to Rs 862 crore due to increased provisions for agriculture and microfinance slippages. While asset quality improved year-on-year, provisions rose to Rs 400 crore. The bank anticipates NIM to bottom out in the second quarter, aiming for stronger retail momentum and overall advance growth in the fiscal year.
IANSKolkata: Private sector lender Federal Bank reported a 15% drop in the first quarter net profit at Rs 862 crore, owing to sharply higher provisions even as its asset quality improved year-on-year.
Net profit was Rs 1,010 crore in the year-ago period.
Provisions and contingencies for the quarter under review stood at Rs 400 crore as compared with Rs 144 crore in the year-ago period, due to elevated slippages from the agriculture and microfinance businesses.
Pre-provision operating profit was at Rs 1,556 crore, up 3.7% year-on-year over Rs 1,501 crore.
“Hopefully we have seen the peak of slippages in the MFI book,” managing director & CEO KVS Manian said. “It was an operationally strong quarter, if you isolate the agri and MFI portfolio.”
The bank’s net interest margin (NIM), a key profitability metric, was at 2.94% for the quarter under review, lowest in the past five quarters.
“We expect NIM to bottom out in the second quarter,” executive director Venkatraman Venkateswaran said.
The lender’s net interest income grew a mere 2% year-on-year at Rs 2,337 crore while other income rose 22% at Rs 1,113 crore. Within other income, the fee income rose 20% at Rs 786 crore while net profit from sale on investments jumped 275% at Rs 127 crore.
“As interest rates go down, non-interest income is something that banks have to get better at,” Manian said.
Total income of the bank grew by 7.64% year-on-year at Rs 7,800 crore.
The bank’s net advances grew 9% year-on-year to Rs 2.41 lakh crore. Retail advances grew by 15.64% to Rs 81,047 crore.
“We do expect stronger retail momentum in the second half with the onset of the festive season,” Venkateswaran said, expecting a 20-25% gold loan growth.
Its gross non-performing assets ratio fell to 1.91% at the end of June from 2.11% a year back. It reported fresh slippages of Rs 658 crore, mostly owing to defaults in agriculture and microfinance loans. Out of Rs 4,670 crore NPA, Rs 1,288 crore were from agri and MFI books.
Its corporate advances registered a growth of 4.47% to reach Rs 83,680 crore. It is aiming for an 8-10% advances growth in corporate side but without compromising margins, executive director Harsh Dugar said.
The bank is looking at a 12-13% advance growth for the fiscal.
Its total deposits rose 8% to Rs 2.87 lakh crore at the end of June.