MUMBAI: The Kochi-based Federal Bank reported a 9.51 percent decline in its September quarter net income at Rs 992 crore on a surge in provisions and fresh slippages.
The oldest private sector lender of Kerala had reported a net profit of Rs 1,096.25 crore for the year-ago period.
The bottom line was hit by the rising stress on asset quality with fresh slippages rising to Rs 579 crore from Rs 428 crore in the year-ago period, and the slippage ratio increasing to 0.94 percent from 0.79 percent a year ago.
The overall provisions for the period jumped to Rs 397.44 crore from Rs 196.14 crore in the year-ago period, which hurt the profit growth the most. The core net interest income rose 5.4 percent to Rs 2,495 crore on the back of a 6.23 percent growth in its loan book and a 0.06 percent compression in the net interest margin from 3.06 percent a year ago.
Managing director and chief executive KVS Manian said demand for corporate loans is still weak and hoped that the increase in consumer demand due to measures like the GST cuts may prompt corporates to initiate capacity additions.
Retail will be the focus area from a loan growth perspective for the bank, he said. However, Manian also said the bank will be cautious on the microfinance and personal loans segment. It can be noted that many private lenders like Kotka Mahindra, Indusind Bank and RBL Bank have burned their fingers badly in these two segments in the past many quarters.
The bank wishes to be profitable in the loan growth efforts, he said, adding it cannot push hard on the home loans front due to the lower yields because of aggressive posturing by competition. The home loans de-grew 1 percent during the quarter, he added.
The other income rose by 12.26 per cent to Rs 1,082 crore.
Manian said deposit grew 7.36 percent, and that the ban will be focusing on increasing the share of the low-cost current and saving account balances going forward.
From an asset quality perspective, fresh slippages came at Rs 579 crore, up from Rs 428 crore a year ago, and the slippage ratio also increased to 0.94 percent from 0.79 percent a year ago, he said, adding however that the slippages are lower than the Rs 658 crore in the previous quarter. However, the gross non-performing assets ratio improved to 1.83 from 1.91 on quarter and at 2.09 on-year.
The overall provisions for the bank jumped to Rs 397.44 crore from Rs 196.14 crore in the year-ago period, which Manian attributed to a the that the changes in the provision policies on the unsecured loan exposures in the December quarter of last year, and hence, the provision numbers are not comparable.
