Federal Bank Q2 net profit slips 26% to Rs 308 crore

Federal Bank’s net profit for the September quarter declined 26% year on year (yoy) to Rs 307.6 crore, impacted by a significant increase in provisions to further strengthen the balance sheet. The Kerala-based lender had reported a net profit of Rs 416 crore in the second quarter of the previous fiscal and Rs 384.2 crore in the first quarter of FY21.

The bank said provisions and contingencies more than doubled to Rs 592.06 crore in Q2, from Rs 251.77 crore in the year-ago period and Rs 394.62 crore in the June quarter.

Shyam Srinivasan, MD & CEO, said the bank continues to weather the turbulence in the external environment by returning strong numbers for CASA and the asset quality.

Srinivasan said the operating profit for the quarter was at Rs 1,007 crore, an increase of 40% YoY.

“Liabilities have grown very well, in particular, CASA has shown 20% year-on-year growth and 6% sequential growth. Growth of low-cost deposits has helped keep the cost of funds lower. On the credit side, we had remarkable growth in our gold loan business and it grew 54% on a year-on-year basis, making it a driver of margin expansion,” he said.

Gross NPA as at the end of Q2FY21 stood at Rs 3,552.19 crore, which as a percentage to gross advances stood at 2.84%. The net NPA and net NPA as a percentage to net advances as on September 30, 2020 stood at Rs 1,218.14 crore and 0.99%, respectively. The provision coverage ratio (including technical write-offs) was 78.3%.

Federal Bank said a mere Rs 3 crore of loans slipped into NPAs and if not for the moratorium about Rs 237 crore of loans would have slipped into NPAs.

The lender also reported the highest-ever net interest income at Rs 1,380 crore, which grew 23% year-on-year. Its net interest margin improved sequentially to 3.13%, from 3.07% in the first quarter of the current fiscal.