Federal Bank posts best ever quarterly net profit, up 59% at Rs 477 cr

Lower provisioning boosts bottom line; operating profit down 7.74% in Q4FY21 to Rs 885 cr

Kochi-headquartered private sector lender Federal Bank has reported a 59 per cent year-on-year (YoY) growth in net profit in the March quarter of FY21 due to lower provisions and a steady net interest income (NII). The banks’ net profit for the period was Rs 477.81 crore, its highest ever in a quarter, compared to Rs 301.23 crore a year ago.

However, the operating profit of the bank was down 7.74 per cent in Q4FY21 to Rs 885 crore, from Rs 959.31 crore in Q4FY20. The lender's NII grew 17 per cent YoY to Rs 1,420. 37 crore but other income was down per cent to Rs 465 crore as there was a one-time treasury gain in the corresponding period last year. Net interest margin stood at 3.23 per cent, up one basis points (bps) sequentially and 19 bps YoY.

The lender said it has created a provision of Rs 21 crore for the interest on interest reversal for borrowers as per the apex court’s order.

Provisions of the lender more than halved YoY in the reporting quarter to Rs 242.33. In the previous quarter (Q3FY21), the bank had made provisions to the tune of Rs 420.62 crore and in Q4FY20, provisions of the lender were to the tune of Rs 567.50 crore.

“We were providing significantly in the first three quarters (FY21) without classifying the assets as NPA. As the NPA recognition came through in March, the provisions were released. It shifted from standard asset provisions to credit provisions”, said Shyam Srinivasan, MD&CEO, Federal Bank.

On the asset quality front, the gross non-performing assets (NPAs) at the end of the March quarter stood at Rs 4,602.39 crore, or 3.41 per cent of the gross advances, compareed with 2.7 per cent a year ago. Net NPAs as a percentage of advances stood at 1.19 per cent at the end of Q4FY21. Fresh slippages for the bank in the March quarter were to the extent of Rs 1,685 crore and its Provision Coverage Ratio (PCR) stood at 65.14 per cent.  

The lender has restructured loans worth Rs 1,409 crore under covid specific restructuring schemes, of which Rs 959 crore are retail loans.

Advances of the lender grew by 9 per cent to Rs 1.34 trillion while retail loans grew by almost 19 per cent, and gold loans grew by 70 per cent. The first two quarters saw no growth but we saw a good pick up in the second half. We are banking on good growth in FY22 but unfortunately, Q1 is going to be a challenge. However, we believe that it will get corrected over time and we should be back to good growth, the bank management said in a media call.  

Deposits, on the other hand, have grown by 13.37 per cent to Rs 1.72 trillion. The current account savings account (CASA) ratio of the bank stood at 33.81 per cent.

“We will have a tough Q1 but I think there are avenues available to help customers and recover lost time. How the full year will shape up is hard to tell. Last year it began badly but ended on a decent note. So, hopefully, it will be a repeat of the same this year”, said Srinivasan.

Shares of the lender closed 2.45 per cent higher at Rs 81.65 on the BSE.