Federal Bank's Q1 net profit drops 8.35% due to higher provisions

Kochi-based private sector lender Federal Bank has reported an 8.35 per cent decline in net profit in April-June quarter of FY22 due to higher provisions. Net profit for the quarter stood at Rs 367 crore as against Rs 401 crore in the same period last year. In Q4FY21, the lender had earned a net profit of Rs 478 crore.

The lender’s net interest income (NII) grew by 9.4 per cent year-on-year (YoY) to Rs 1,418 crore in Q1FY22 compared to Rs 1,296 crore in the year-ago period. And, net interest margin (NIM) stood at 3.15 per cent, a three-quarter low for the lender. Other income of the lender was up 33.13 per cent to Rs 650.15 crore, aided by treasury gains and one-off recovery in a large account, which was written off in the past.

The bank increased its provisions by 62.64 per cent YoY to Rs 641.83 in Q1FY22 while sequentially it was up 164 per cent. Of Rs 642 crore, provisions for loan loss were Rs 459 crore and for standard accounts was Rs 180 crore.

The lender's asset quality saw marginal deterioration as gross non-performing assets (NPAs) moved up to 3.50 percent at the end of the June quarter compared to 3.41 percent as of March 31, 2021. Fresh slippages were to the tune of Rs 640 crore in the reporting quarter as against Rs 598 crore in Q4FY21 and Rs 184 crore in Q1FY21. In the quarter, the lender wrote off loans worth Rs 439 crore. Net NPAs of the lender moved up 4 basis points from the March quarter to 1.23 per cent.

“The environment in April - May was quite challenging. We saw things improve in the middle to back end of June and through this period, despite all the odds, the collection efforts were quite strong”, said Shyam Srinivasan, MD&CEO, Federal Bank.

Its restructured book stood at Rs 2,915 crore at the end of the June quarter as against Rs 1,917 crore in the March quarter. Its covid related restructuring book stood at Rs 2,414 crore, of which Rs 850 crore has come from the second restructuring package of the central bank.

By the end of Q2, another Rs 400 - 500 crore worth of loans may come up for restructuring, the management said.

On the Mastercard ban, with which the bank had an exclusive tie-up, the management said they have started the process with both Visa and RuPay, and over the course of the next two months, we will be able to be back in action.

Overall the advances book of the lender grew by 8 per cent YoY to Rs 1.3 trillion, with the retail book growing by 15 per cent, agribusiness by 24 per cent, and commercial banking by 10 per cent. “Credit growth continues to be modest, mostly because Q1, for the most part, was stressed”, said Srinivasan.  

Total deposits were up by 9 per cent YoY to Rs 1.69 trillion , with CASA deposits up by 19 per cent to Rs 58,958.79 crore.

The capital adequacy ratio (CRAR) of the bank, 14.64 per cent as of the end of the quarter.

Meanwhile, the bank in an exchange filing said, its board of directors approved the allotment of 104.8 million equity shares at the issue price of Rs 87.39 per share to International Finance Corporation, IFC Financial Institutions Growth Fund, and IFC Emerging Asia Fund.

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