Better asset quality, higher advances lift Federal Bank net 31%

The Kochi-headquartered bank had registered a net profit of Rs 201.24 crore in September quarter last year.

It, however, reported a spurt in retail and agriculture loans slipping into the non-performing assets category due to a slowdown and expectations of farm loan waivers.

The core net interest income rose 23.79 per cent to Rs 898.81 crore courtesy a 25 per cent surge in the loan book which included a 35 per cent rise in corporate advances, but the other income grew only marginally to Rs 287.22 crore.

Gross bad loans ratio improved to 2.39 per cent.

The bank reported fresh slippages of Rs 284 crore, but a majority of them came in from agri (Rs 50 crore) and retail (Rs 107 crore).

Managing director and chief executive Shyam Srinivasan said the trend of rise in fresh slippages has bottomed out and the bank expects another one or two quarters of slippages in the range of Rs 250-300 crore before it improves.

He said the bank suffered reverses on mortgage loans in its home market Kerala due to the economic slowdown and also lifting of the post-demonetisation dispensation, where banks were allowed not to classify certain small ticket loans as bad loans.

On the farm loan front, he said weather-related issues and expectations of farm loan waivers have hurt repayments.

Srinivasan, however, said that 80 per cent of the overall loan book is outside Kerala, where it has been witnessing these issues with regard to repayments.

The bank improved the net interest margin to 3.32 per cent from the 3.13 per cent in the year-ago period and is targeting to maintain it at 3.25 per cent, despite the ongoing regulatory tinkering on the rates front, Srinivasan said.

Share of the low-cost current and saving account deposits stood at 32.93 per cent.

The capital adequacy was 14.6 per cent, including 14.09 per cent in core tier-I capital.

Investors cheered the numbers and the bank scrip closed at Rs 124.80 per piece, up 6.48 per cent on the BSE, as against a 0.62 per cent rise in the benchmark.