Federal Bank net profit rises 9.2%

Lower provisions, improved asset quality aid earnings

Kerala-based private lender Federal Bank on Friday said its net profit for the quarter ended December 31, 2013 increased 9.2 per cent from a year earlier to Rs 230.1 crore, as it made lower provisions on the back of improved asset quality.

“Our asset quality has improved significantly, which is encouraging in the current stressful environment. We closed the third quarter with reasonably good credit quality, but we will continue to remain cautious going forward,” said Shyam Srinivasan, managing director and CEO of Federal Bank, in his post-earnings comments.

The gross non-performing assets of the bank fell to Rs 1,201 crore in the October-December 2013 period from Rs 1,466 crore in the previous quarter. The gross bad loan ratio improved 56 basis points (bps) sequentially and 102 bps year-on-year (y-o-y) to 2.83 per cent at the end of December 2013. Net non-performing asset ratio also declined by 12 bps sequentially and 6 bps y-o-y to 0.86 per cent during the three-month period. This allowed the bank to pare its total provisions 31 per cent from a year earlier.

Net interest income, or the difference between interest income and interest expenditure, rose 9.7 per cent from a year ago to Rs  545.6 crore in the third quarter of FY14. Net interest margin declined 23 bps, y-o-y, to 3.24 per cent in the October-December 2013 period. Net advances were up 5.43 per cent from a year earlier at Rs 41,639 crore during the quarter under review.

Retail advances increased by 11.5 per cent, y-o-y. Total deposits grew by 11.9 per cent from a year ago to Rs  57,737 crore. The share of low-cost current account and savings account deposits improved to 30.36 per cent at the end of December 2013.

The bank closed the quarter with a capital adequacy ratio of 14.80 per cent according to Basel III rules.