KOCHI: How long will it take for Federal Bank, Kerala’s largest bank on all parameters, to become a truly pan-India bank?
With close to 60 per cent of its deposits and about one-third of its advances revolving around its home state of Kerala, Federal Bank continues to play a dominant role in the state’s banking landscape.
However, as the bank with a market share of about 1.3 per cent based on deposit and advance base, looks to expand its footprint beyond regional boundaries, a pressing question arises – how long will it take for Federal Bank to evolve into a truly pan-Indian institution?
The bank’s growth has been phenomenal compared with its Kerala peers. “But will that be enough if it harbours higher ambitions?” is a point raised by a banking analyst speaking to businessbenchmark.news.
Despite being established around the same time, the two other leading Kerala-based banks, South Indian Bank (SIB) and CSB Bank (formerly Catholic Syrian Bank), showcase a significantly different achievements in size and scale, ideally represented by their asset sizes.
Notably, CSB Bank celebrated its centenary in 2020 whereas SIB is less than four years away from that milestone, yet their growth remains anomalous compared with Federal Bank.
While Federal Bank’s assets amounted to Rs3.18 lakh crore as of June 30, 2024, South Indian Bank’s total assets were significantly lower at Rs1.18 lakh crore, and CSB Bank’s assets at just Rs36,060 crore are not even comparable.
Still remains a regional player
While Federal Bank operates across the country, business continues to have sizeable presence in southern India.
Kerala, Tamil Nadu, Karnataka, Andhra Pradesh, and Telangana cumulatively account for 72 per cent of deposits and 58 per cent of advances, respectively, as on March 31, 2024.
“With the home state of Kerala accounting for bulk of the bank’s deposits and sizeable advances, the concentration risk is mitigated by the relatively better economic performance of this region,” the leading credit rating agency CRISIL Ratings noted.
NRI deposits (majorly part of deposits in Kerala) are diversified by the location of the NRI customers. Federal Bank has advances of Rs 2,20,807 crore and deposits of Rs2,66,065 crore as on June 30, 2024.
It has a strong NRI customer base in the Middle East. The bank had 1,518 banking outlets and 2,041 automated teller machines/cash recyclers as on June 30, 2024.
Healthy capitalisation
Capitalisation metrics of the bank have remained healthy, supported by regular rounds of capital raises and stable internal accretions.
Overall capital adequacy ratio (CAR, under Basel III) was 15.57 per cent as on June 30, 2024 against 15.24 per cent as on March 31, 2023.
Net worth increased to Rs30,105 crore as on March 31, 2024, from Rs22,122 crore as on March 31, 2023, driven by higher internal accrual.
In July 2023, the bank raised Rs3,040 crore as capital via Qualified Institutional Payment (QIP). It also raised Rs959 crore from International Finance Corporation (IFC) via preferential issuance done in the same period.
Net worth coverage of net non-performing assets improved to 23 times as on June 30, 2024 (22 times as on March 31, 2024), from 20 times as on March 31, 2023.
