It’s Back-to-Basics for Federal Bank

Bank to embark on branch expansion in big way

KOCHI: Claims of being one of the top three banks in the digital lending space in the country don’t in any way impede the aspirations of Federal Bank to spread out with physical presence in the country.

Kerala’s largest bank by far, Federal Bank, is once again going out in search of good locations to open its shops outside Kerala where bulk of its branches are established, after a fairly long gap.

Elaborating on the branch expansion plan, MD and chief executive of the bank, Shyam Srinivasan (seen in the picture) who helmed the bank for close to a decade through hell and high water, said the bank would open at least 80 branches in the coming two years.

What makes the new announcement surprising to the banking circles in the country is the fact that Federal had never bothered to add branches to its 1251-strong network in the past five years.

The bank while achieved 43 per cent increase in its share of digital transaction during the fourth quarter year-on-year from 27.31 lakh to 39.06 lakh as of March 31, 2019, the transactions through branches not only refused to grow but declined marginally from 14.21 lakh to 14.09 lakh during this period

The new move to increase its branch network outside Kerala shows the bank’s ambition to grow its retail presence outside Kerala that is home for 599 branches or almost 48 per cent of its total branch network. The interesting part is that after burning their fingers at corporate lending, most Kerala-based banks have turned their focus on to retail space for their bread and butter.

Talking to analysts recently, Srinivasan said that excluding Kerala, the bank would look at adding about 40-50 branches per year for the next two years. He said the branch network need not be on conventional model but rather could be a mix of self-service, automated and regular branches depending on the need of each location.

“Over the next two years, we will probably put 80 to 100 branches in certain geographies outside of Kerala,” he wrapped up the discussion on that.

Federal Bank, which witnessed robust growth of 20 per cent plus on both credit and deposit for the financial year under review, also saw the bank turn in the largest full year net profit of Rs1282.52 crore and quarterly profit of Rs382 crore in its history.

As far as the profitability ratios, the bank’s return on assets (ROA) exceeded 1 per cent as guided, whereas the return on equity (ROE) reached a comfortable 11.86 per cent as the financial year closed on March 31, 2019.

For the first time in the past 9 quarters, the bank could achieve larger volumes of recoveries compared with slippages and this certainly points to better quarters going forward in terms of performance and bottom line.

During the just concluded fourth quarter, while the recovery upgrades were worth Rs323 crore, slippages were at about Rs256 crore. “Moreover, the recovery upgrades were quite granular barring one transaction where the bank did a cash sale and exited an account,” the bank said while addressing analysts.

Federal top officials also made its position clear that the bank didn’t have any direct exposure to troubled entities such as Essel, RCom, Reliance Infra or Jet Airways.