Federal Bank's Q4 PBT declines 32% over provisions for Covid-19 pandemic

Private sector lender Federal Bank’s profit before tax (PBT) dipped by 32.09 per cent to Rs 391.82 crore for the fourth quarter ended March 2020 (Q4Fy20) due to provisions for the impact of the Covid-19 pandemic. It had posted a PBT of Rs 576.99 crore in quarter ended March 2019 (Q4FY19).

The bank's net profit for the quarter under review declined to Rs 301.23 crore from Rs 381.51 crore in Q4FY19, while its net profit for the financial year ended March 2020 (FY20) rose to Rs 1,542.7 crore from Rs 1,243.8 crore in FY19.

The lender's stock closed 4.27 per cent higher at Rs 42.7 on BSE.

The bank's net interest income (NII) rose to Rs 1,216 crore in Q4FY20 from Rs 1,097 crore in same quarter of the last financial year.

The provisions rose substantially to Rs 567.5 crore in Q4FY20 from Rs 177.76 crore in Q4Fy19.  The provision coverage ratio improved to 72.48 per cent at end of March 2020, up from 67.16 per cent in March 2020.

The bank made a 10 per cent provision amounting to Rs 30.26 crore in Q4 to deal with the impact of the Covid-19 pandemic. It also made an additional provision of Rs 63.03 crore as of March 31, 2020 against the likely impact of Covid-19 pandemic over its exposure to certain specified sectors. The entire provision of Rs 93.29 crore in respect of Covid-19 impact is grouped under other liabilities and provisions in the balance sheet.

“We have increased the provisions substantially and strengthened the balance sheet to face any unfavorable situation that may arise due to the pandemic,” said Shyam Srinivasan, managing director & chief executive of Federal Bank.

The bank's provision coverage ratio improved to 72.48 per cent at end of March 2020, up from 67.16 per cent in March 2019.

The lender's asset quality showed an improvement in slippages during the fourth quarter. The gross non-performing assets (GNPAs) stood at 2.84 per cent in Q4FY20 down from 2.92 per cent in Q4FY19. The bank's gross NPAs stood at 2.99 per cent at the end of December 2019 (Q3FY20).

As on March 31, 2020, the bank grew deposits by 12.85 per cent to Rs 1,52,290 crore. The advances grew by 11.02 per cent to Rs 1,24,153 crore in FY20.

When asked about the growth outlook, Srinivasan said the situation was evolving and focus was on preserving capital and to come out from the situation with as little damage as possible. "Preserve, conserve and safety are the three priorities before the bank," he said.

The bank's capital sdequacy ratio (CAR) remained strong at 14.35 per cent as on March 31, 2020, with Tier I at 13.29 per cent and Tier II at 1.06 per cent.

"The bank has an adequate capital base and does not see a need for additional capital raising in the next 12 months," Srinivasan added.