Federal Bank net jumps 26 percent on core income, better asset quality

The Kochi-headquartered bank saw its net interest income rising 20 per cent to Rs 950 crore in the reporting quarter on a 22 per cent surge in advances and net interest margin being maintained at 3.33 per cent.

Reverses on account of surge in yields impacted the non-interest income which declined to Rs 230 crore as against Rs 275 crore in the year-ago period.

Managing director Shyam Srinivasan explained that trading gains more than halved to Rs 29 crore from Rs 85 crore a year ago.

Credit growth has been diversified, and the bank is staying away from long tenor advances especially to infrastructure-linked sectors which have witnessed stress in the recent times, Srinivasan said.

On the asset quality side, gross non-performing assets ratio came down 0.25 per cent to 2.52 per cent, despite fresh slippages of Rs 411 crore. Overall provisions marginally rose to Rs 162 crore from Rs 158 crore on an annualized basis.

Slippages during the quarter were diversified with a surprising Rs 71 crore coming in from education loans in its biggest market of Kerala, he said.

Going forward, the bank expects to maintain slippages around the same level in the fourth quarter and the first quarter of the next fiscal, Srinivasan said.

The bank is yet to be communicated about any divergences in bad asset recognition from the RBI and impact, if any, will be recognised in the fourth quarter, he said.

Barring one account, it is not carrying any exposure to any of the 40 dud accounts mandated by RBI to be resolved under the provisions of the IBC, he said.

Going ahead, a bulk of the impact on provisions will be on account of the resolutions of past problems, he said, adding total credit costs will be up to 0.80 per cent as against 0.59 per cent in the reporting quarter.

The bank is well capitalised at 14.4 per cent and will not require an infusion for 18 months considering a loan growth of 20 per cent, its current rate of book expansion.

The board has approved a fund raising of up to Rs 500 crore through a bond sale and may go ahead with the issue in the fourth quarter if it gets the right pricing, he said.

Ahead of the earnings announcement investors were cautious on the Federal Bank scrip, which closed 1.61 per cent down at Rs 113.25 on the BSE, as against a 0.73 per cent rally of the benchmark Sensex.