Mumbai, May 6 (PTI) Federal Bank on Friday reported its highest quarterly net profit at Rs 540.54 crore for the March 2022 quarter, up 13.13 per cent year-on-year, on improved asset quality and higher loan sales.
The Kochi-based bank also guided towards 15 per cent asset growth and matching deposit mop-up this fiscal despite the end of the easy money regime of the past three years.
The largest private sector lender in Kerala booked a net income of Rs 1,889.82 crore for the full year, up 18.83 per cent year-on-year on a net interest income of Rs 5,961.96 crore, which expanded by 7.74 per cent.
Its managing director and chief executive Shyam Srinivasan and group president and chief financial officer Venkatraman Venkateswaran sounded bullish on FY23, forecasting a 15 per cent loan and deposit growth, despite the RBI delivering a hard, unscheduled rate increase only two days ago hiking steeply the repo rate by 40 bps to 4.40 per cent and CRR increase of 50 bps.
Normally, at the beginning of the interest rate hike cycle, people tend to advance their credit demand as they want to be ahead of the curve. This tends to higher demand in the first two-three quarters of the rate hike season. So, I expect credit demand to be strong in the first two-three quarters, Srinivasan told reporters in an earnings call.
Given that the system-wide blended credit demand was around 10 per cent in FY22, I expect the same should print in this year, too, unless the Ukraine war grows into a mega global problem and the pandemic again rears its head. And for a bank like us, with over 90 per cent of the assets locked in the retail book, we should be able to grow much above the system level, say at 15-odd per cent credit and a matching liabilities growth as well, he added.
The better set of numbers was aided by improved asset quality wherein gross dud loans came down to 2.80 per cent (Rs 4,136.74 crore) of the assets from 3.41 per cent year-on-year, and the net bad loans also fell to just 0.96 per cent of the book (Rs 1,392.62 crore) from 1.19 per cent.
This has the bank making lower provisions but increasing the provision coverage ratio to 65.54 per cent, Venkateswaran said.
The key profitability gauge, net interest margin stood at 3.20 per cent and he expects the margin to improve this fiscal as there is a lag of a couple of quarters before the liabilities are repriced in a rising interest rate cycle.
The bank also ruled out capital raising in the near term, citing the high 15.77 per cent capital adequacy ratio, up from 14.62 per cent year-on-year with the core capital at 14.43 per cent up from 13.85 per cent.
The total business grew 7.10 per cent to Rs 3,29,340 crore from Rs 3,07,521.19 crore a year ago.
Gross advances grew 9.46 per cent to Rs 1,47,639.45 crore from Rs 1,34,876.71 crore led by agri loans that jumped 19.93 per cent to Rs 19,238 crore from Rs 16,041.43 crore; business banking loans registered a 15 per cent growth to Rs 13,869 crore, and commercial banking advances grew 12 per cent to reach Rs 14,806 crore.
On the other hand, deposits recorded a growth of 5.25 per cent to Rs 1,81,700.57 crore from Rs 1,72,644.48 crore; of which the low-cost casa deposits constituted 36.94 per cent or Rs 67,121.21 crore; resident savings deposits grew 16.04 per cent to Rs 29,953.44 crore.
Venkateswaran said as much as 44 per cent of its loans are linked to the external benchmark, 27 per cent on the fixed-rate and 18 per cent on the MCLR and almost all the retail and home loans are on the external benchmarked rate.
When asked how has been the performance of the NRI book, Srinivasan said it has been a record year, as normally when the rupee falls and crude prices jump, the remittance flow increases, and given the same phenomenon last year was very high, the bank made it good.
Of the Rs 60,600 crore NRI deposits that flew into the state through 12 official channels /banks, we commanded 21 per cent in FY22. Our share was only 7-8 per cent say five-six years ago, Srinivasan said.
The bank has been holding back branch expansion in the past three years to make sure that each branch is profitable, Srinivasan said.
The bank closed the year with 1,282 branches and 1,885 ATMs. That apart it has representative offices in Abu Dhabi and Dubai and an IFSC banking unit in the Gift City.
Srinivasan also said they are awaiting the Sebi nod for the IPO of its JV arm Fedfina, which has already filed the draft IPO papers.
He also said, the front load growth in the early quarters of the fiscal, they will be on a hiring binge, which will also be front-loaded. The Federal counter closed 3.6 per cent down at Rs 90.70 on the BSE, battered by the third consecutive day of market rout after the RBI hiked the rates. PTI BEN BAL BAL
