Federal Bank’s profit falls 8% on provisions

Kochi-based private sector lender Federal Bank on Friday reported an 8.35 per cent decline in net profit for the June quarter as provisions rose.

Net profit was ~367 crore against ~401 crore in Q1FY21. In the previous quarter (Q4FY21), the lender had earned a net profit of ~478 crore. Net interest income (NII) grew 9.4 per cent year-onyear (YOY) to ~1,418 crore in Q1 compared to ~1,296 crore. Net interest margin (NIM) was 3.15 per cent, a three-quarter low for the lender.

The bank said it expects to restructure an additional ~400-500 crore worth of loans by Q2-end. Other income was up 33.13 per cent to ~650.15 crore, aided by treasury gains and one-off recovery in a large account, which was written off in the past.

The bank increased its provisions by 62.64 per cent YOY to ~641.83, while sequentially it was up 164 per cent. Of this, provision for loan loss was ~459 crore and ~180 crore for standard accounts.

Asset quality saw marginal deterioration as gross nonperforming assets (NPAS) moved up to 3.50 per cent in Q1 compared to 3.41 per cent as of March 2021.

Fresh slippages were at ~640 crore against ~598 crore in Q4FY21 and ~184 crore in Q1FY21. The lender wrote off loans worth ~439 crore in the quarter. Net NPAS moved up 4 basis points from the March quarter to 1.23 per cent.

“The environment in April-may was quite challenging. We saw things improve in the middle to back end of June and through this period, despite all the odds, the collection efforts were quite strong,” said Shyam Srinivasan, MD & CEO, Federal Bank.