Federal Bank Q2 Net Profit Jumps 45% on FCNR Deposits

Mumbai: Private sector lender Federal Bank on Friday reported a 45 per cent jump in the September quarter net profit to Rs 1,386 crore, helped by its USD 1.5 billion fundraise under the RBI’s FCNR(B) concessional swap scheme.

The South-based lender’s net profit a year ago stood at Rs 955 crore and the same in the quarter-ago period was Rs 1,177 crore.

Amid reports of the bank in advance talks with Jana Small Finance Bank for a merger, its chief executive and managing director KVS Manian declined to give a specific answer, but added that the banks continue to be interested in inorganic growth opportunities and evaluate various options.

However, there is nothing specific to disclose at this point in time, he said.

For the quarter under review, its core net interest jumped 26 per cent to Rs 3,153 crore on the back of a 22 per cent loan growth and a 0.26 per cent expansion in the net interest margin to 3.32 per cent.

Manian said the bank is aiming for a 0.05-0.06 per cent expansion in the NIM on a quarterly basis.

It expects three to four more rate hikes by the RBI over the next year and that asset prices get repriced faster than deposits. About 45 per cent of the bank’s lending book is linked to the external benchmark, he noted.

The non-interest income rose to Rs 1,490 crore from Rs 1,082 crore in the year-ago period.

The bank’s USD 1.5 billion deposit raise from the diaspora under the FCNR(B) scheme helped in both reducing the reliance on bulk deposits, which widened the net interest margin and in funding assets, he said, adding that the bank booked retail assets of another Rs 9,438 crore using the leverage facility made available.

Federal Bank is circumspect when it comes to loan growth in the agri portfolio, he said, adding that it has not noticed any adverse impact of the El Nino factor on its book.

It is also cautious about the power and infrastructure sectors due to their long-term funding demand. Gold loans, which surged 37 per cent in Q2, can rise further as well, a senior official said, pointing out that it can take the overall contribution from the sector to 20 per cent of the overall book from the current 14.5 per cent.

From an asset quality perspective, the fresh slippages declined to Rs 420 crore from the Rs 579 crore in the year-ago period, and the gross non-performing assets ratio declined to 1.32 per cent from 1.52 per cent three months ago.

The proposed distribution reforms by Irdai may have some impact on the bank, Manian said, adding that it is assessing the same right now.

The acquisition of foreign lender Standard Chartered’s card portfolio will be completed by December, and the deal will add around 20 per cent to its portfolio of cards, a senior official said, adding that the growth will be higher for the loan expansion in the segment.

The overall capital adequacy stood at 16.84 per cent in September against 16.97 per cent in June.

The Federal Bank scrip gained 0.6 per cent to close at Rs 337 apiece on the BSE, against gains of 0.56 per cent on the benchmark.

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