Federal Bank Q1 net falls 8.3% on higher provisioning

Provisions and contingencies stood higher at Rs 641.83 crore, against Rs 394.62 crore in the year-ago period. The provision coverage ratio (including technical write-offs) was strengthened substantially and stood at 78.66%.

Federal Bank on Friday reported an 8.3 % year-on-year (y-o-y) decline in its net profit to Rs 367.29 crore for the first quarter of the current fiscal, mostly due to higher provisioning for bad loans. The lender had reported a net profit of Rs 400.77 crore in the year-ago period and Rs 477.81 crore in Q4FY21.

The asset quality deteriorated, with gross NPA as a percentage of gross advances increasing to 3.50% from 3.41% in Q4FY21 and 2.96% in the year-ago period. Net NPA ratio too increased to 1.23% from 1.19% in the preceding quarter and 1.22% in the comparable quarter of the last fiscal.

Provisions and contingencies stood higher at Rs 641.83 crore, against Rs 394.62 crore in the year-ago period. The provision coverage ratio (including technical write-offs) was strengthened substantially and stood at 78.66%.

Shyam Srinivasan, MD & CEO, said the provisioning policy continues to be very conservative so that the balance sheet remains strong. “For Rs 640-crore of fresh slippages in the quarter, we have provisioned Rs 460 crore as a choice. Even in gold loans, which is 100% secure, we have provisioned 65%. Our unsecured book is very marginal. There is no lumpy slippages,” he said.

The bank recorded the highest-ever operating profit of Rs 1,135.18 crore in the quarter, 22% higher y-o-y. Net interest income grew 9.41% to Rs 1,418.43 crore while other income grew 33.13% to reach Rs 650.15 crore.

The total business of the bank reached Rs 299,158.36 crore, registering a y-o-y growth of 8.30%. Total deposits reached Rs 169,393.30 crore, registering a growth of 9.33%. Net advances grew by 6.98% to reach Rs 129,765 crore. On the assets side, gold loans registered a growth of 53.90% to reach Rs 15,764 crore.

“The external environment continues to be challenging. However, we have managed to keep our operating momentum intact by delivering our highest-ever operating profit for the quarter. Our CASA ratio is at an all-time high and we continue to build a granular liability franchise with more than 90% of our deposits being retail in nature,” he said.

The bank raised Rs 916 crore in equity capital by issuing shares to International Finance Corporation and its affiliates .

The capital adequacy ratio computed as per Basel III guidelines stood at 14.64% at the end of the quarter.