A 57 per cent fall in provisions year-on-year helped profits in a big way in the quarter ended March. CEO Shyam Srinivasan said the bank is ready to make more provisions if required during the current fiscal.
Total provisions fell to Rs 242 crore in March 2021 from Rs 568 crore a year ago as the bank used up a majority of its Covid related provisions done over the last fiscal.
“The drop in provisions is because it has moved to the credit line from standard assets as the loans which were already provided for, slipped into NPAs after the Supreme Court (SC) lifted the moratorium in March. We will provide more if required as and when the situation arises,” Srinivasan said.
The bank held a provision of Rs 537 crore as of December 2020 for the likely impact of Covid-19 of which it utilized Rs 61 crore for restructured loans and Rs 475 crore for loans which were classified into NPAs. The bank still held Rs 150 crore for provisions on the Rs 1400 crore loans it restructured according to the RBI mandate last year.
Federal Bank’s net profit rose 59 per cent in the quarter ended March 2021 from a year ago led by an increase in gold loans and also as provisions halved versus the year ago as the bank did not make any new provisions during the quarter.
Net profit increased to Rs 478 crore from Rs 301 crore a year ago due to a 17 per cent rise in net interest income (NII), the core income of the bank, mainly as retail loans grew by 19 per cent year on year due to a staggering 70 per cent rise in gold loans year on year.
Srinivasan said the bank plans to maintain its provision coverage ratio (PCR) at 65 per cent this fiscal even he declined to give any guidance on loan growth or likely stressed assets due to the ongoing second wave of Covid 19.
“It is very difficult to predict but yes April and May have been tough from a collection standpoint. We are not making a judgement yet but keeping a close watch. I suspect it will be like last year when things were tough in the first quarter but picked up after that with the last quarter being the best. Collections are tough given that outbound physical contact has evaporated. But we have bonafides to connect with customers for recovery. Hopefully things will ease in the next two-three weeks in June-July,” Srinivasan said.
Gross NPA increased to 3.41 per cent of loans from 2.84 per cent a year earlier and up from 2.71 per cent reported in December 2020 as the SC moratorium was lifted.
The bank’s total advances increased 9 per cent to Rs 1.34 lakh crore led by a 19 per cent growth in retail loans which was pushed up by a staggering 70 per cent rise in gold loans. Corporate loans fell 6 per cent year on year. The bank had to reverse Rs 21 crore of interest due to the SC order forbidding banks to charge compounded interest.
Gold loans Rs 15,816 crore now constitute about 12 per cent of the bank’s loan book. Srinivasan said he still expects a 25 per cent to 30 per cent of growth this year from the segment even as the bank has set an internal threshold of gold loans at 15 per cent of its loan book.
Other income fell 35 per cent to Rs 465 crore from Rs 711 crore a year earlier as unlike last year the bank did not have a Rs 180 crore gain on sale of investments.
Srinivasan said the bank has received requests for restructuring of Rs 100 crore of loans from micro and small enterprises after a fresh window was allowed by the RBI last month. He expects more requests to come as enterprises take stock of the situation due to the second Covid wave.
