Federal Bank settles at Rs308 cr Q2 profit; Rs1007 cr record high operating profit

Cost-to-income ratio at 46.72 pc; gold loans grow to Rs12,691 cr

KOCHI/October 16: The Federal Bank, the largest bank in Kerala in terms of assets at Rs1.89 lakh crore, though registered its largest quarterly operating profit of Rs1007 crore after growing 40 per cent year-on-year, closed the quarter ending September (Q2) with a not-so-impressive net profit of Rs307.62 crore.

The Q2 net profit was 26.18 per cent lower than that a year earlier at Rs416.70 crore and 23.24 per cent lower compared with that in the immediate previous quarter at Rs400.77 crore.

The bank has gone for a lavish provisioning during the past two quarters, and at the same time could achieve one of the best-in-history cost-to-income ratios.

The provisions that have been set aside by the bank for the quarter under review at Rs592.06 crore were 135 per cent higher compared with a year ago, and this has been instrumental in the bank posting a relatively lower net profit for Q2.

The operating efficiency of the bank is evident from the lowest cost-to-income ratio of 46.72 per cent achieved by the bank during the said quarter.

Shyam Srinivasan, Managing Director & CEO of Federal Bank, said the bank continues to weather the turbulences in the external environment by returning strong numbers for CASA and asset quality.

“As a prudent step and as part of strengthening the balance sheet, the bank made standard asset provisions of Rs402 crore, taking the total to Rs588 crore held at end of Q2,” Srinivasan added.

Conservative provisioning

On the provisions front, the bank has proved that it has taken a very conservative stand that will likely help the bank reap greater benefits in the future periods going forward.

As on June 30, 2020, the bank was maintaining provision against the likely impact of COVID-19 amounting to Rs186.30 crore, which the bank claims was higher than required.

During the current quarter, again the bank has made additional provision of Rs401.61 crore against the further likely impact of COVID-19 pandemic.

The aggregate provision against the likely impact of COVID-19, including the RBI mandated provision, as on September 30, 2020 stood at Rs587.91 crore, and has been grouped under ‘other liabilities and provisions’ in the balance sheet of the bank.

The bank has strengthened its provision coverage ratio (PCR) to 64.65 per cent from 58.54 per cent a quarter earlier. The bank says it is additionally maintaining Rs588 crore of specific standard asset provision including Rs402 crore made during the quarter.

The CASA deposits grew during the period by 20 per cent to Rs52,786 crore, and this now constitute 33.68 per cent of the total deposits even as retail deposits account for almost 90 per cent of the deposit base of the bank.

Gold loans at Rs12,691 cr

On the asset side, gold loans continued their impressive run with a growth of 54.02 per cent reaching Rs12,691 crore as on September 30, 2020 whereas the retail advances grew by 13.30 per cent to reach Rs39,649.20 crore.


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