Kerala Based Federal Bank has reported modest increase in the Net profit by 36% to Rs 191.16 crore over marginal 8% increase in NII at Rs 474.41 crore and 6% dip in operating profit at Rs 361.27 crore in the quarter ended September 11. NIM has declined to 3.77% against 4.44% a year ago and 3.87% a quarter ago. Spike in the cost of funds coupled with dip in the non interest income by 19% to Rs 116.96 crore has led Net revenues to grow marginally 2% to Rs 591.37 crore. 30% dip in the total provisions at Rs 170.11 crore for lifted Net Profit up 36% on y-o-y basis.

Asset Quality

• Gross NPA has inched up 14% on y-o-y and declined 4% q-o-q to Rs 1250.26 crore in the quarter ended September 11. Net NPA has increased 5% y-o-y and 17% q-o-q to Rs 195.72 crore in the quarter under review.
• %GNPA improved to 3.61% in quarter under review against 3.84% a year ago and 3.94% a quarter ago. %NNPA also improved to 0.58% against 0.68% a year ago and 0.74% a quarter ago. Provision coverage ratio stood at 82.97% at end of September 11. The Bank has restructured Rs 33.33 crore of advances in the quarter review.

Business Highlights

• Business of the bank grew 8% q-o-q and 27% y-o-y to Rs 80870 crore while asset book grew 31% y-o-y and 9% q-o-q to Rs 57704 crore at end of September 11.
• Advances grew 5% q-o-q and 22% y-o-y to Rs 33607 crore at end of September 11. Gold loans grew whooping 155% to Rs 3081.80 crore while retail advances grew 9% to Rs 9673 crore. Corporate credit grew 40% to reach Rs 15000 crore while that of SME advances grew 12% to Rs 9970 crore. Agri loans grew 29% to Rs 4369.58 crore in the quarter under review.
• Deposits grew 10% q-o-q and 31% y-o-y to Rs 47263 crore at end of September 11. CASA deposits grew 16% to Rs 12166.49 crore while low cost FCAB (NRE) deposits grew 68% to Rs 1531 crore. NRE deposits grew 19% to Rs 6622 crore in the quarter under review.
• Cost of deposits spiked to 7.44% in quarter ended September 11 against 5.88% in the corresponding previous year. On the other hand, yield on advances inched up to 12.74% in quarter under review against 11.21% a year ago.
• Average cost of funds has inched up from 6.03% at end of September 10 and 7.09% at end of June 11 to 7.59% at end of September 11.
• NIM has declined to 3.77% against 4.44% a year ago and 3.87% a quarter ago.
• Capital Adequacy ratio stood at 15.05% with Tier I ratio of 14.03% at end of September 11 against 15.57% with Tier I capital of 14.71% in the quarter ended June 11.
• Investment book grew 20% q-o-q and 50% y-o-y to Rs 18798 crore at end of September 11. Yield on investments has also inched up to 7.24% from 7.04% a year ago.
• Book Value per share has improved to Rs 318.39 at end of September 11 against Rs 290.16 in the corresponding previous year.
• ROA has increased to 1.44% against 1.34% a year ago. ROE has also inched up to 14.29% against 11.48% a year ago.

Quarterly Performance

For the quarter ended September 11, the Bank has reported marginal 8% increase in NII at Rs 474.41 crore. Interest earned inched up 40% to Rs 1367.83 crore on the back 36% jump of interest Rs 1050.05 crore and 52% jump in the income from investments at Rs 310.24 crore. However, average cost of funds inched up to 7.59% against 7.09% a quarter ago and 6.03% a year ago. Thus the interest expended moved at faster pace of 65% to Rs 893.42 crore.

The other income slipped 19% to Rs 116.96 crore owing to flat growth in the exchange, commission and brokerage income at Rs 31.35 crore, 6% dip in other fee income at Rs 30.33 crore and sharp 71% fall in the recovery at Rs 13.64 crore. Resultantly, Net revenues marginally inched 2% to Rs 591.37 crore.

The employee expenses of the bank has improved 6% to Rs 128.25 crore and other operating expenses by 33% to Rs 101.85 crore resulting operating expenses up by 17% to Rs 230.10 crore. Cost to income ratio has spurred up by whooping 500 bps to 38.9% and pulled down operating profit down by 6% to Rs 361.27 crore. However, sharp 58% dip in provisions and contingencies at Rs 72.19 crore came to rescue and led PBT up 35% to Rs 289.08 crore. The provisions on investment losses fell 12% to Rs 6.82 crore, provision for loan losses declined 60% to Rs 56.98 crore and other provisions fell 57% to Rs 8.39 crore. PBT was lifted up 35% to Rs 289.08 crore. Finally 70 bps dip in effective tax rate at 33.9% has resulted Net Profit up 36% to Rs 191.16 crore.

Half yearly Performance

For the half year ended September 11, the company has reported 24% increase in Net Profit at Rs 337.32 crore over 10% increase in NII at Rs 934.16 crore. Dip in the fee income by 8% to Rs 233.86 crore coupled with 390 bps increase in the cost to income ratio at 38.8% has tumbled operating profit down 1% to Rs 715.32 crore. Thanks to 16% dip in the total provisions, Net Profit was up 24% on y-o-y basis.

• Provisions for gratuity, pension (other than second option for pension by employees), leave encashment, bonus, income tax including deferred tax and other usual and necessary items have also been made. In accordance with the RBI letter no. DBOD.BP.BC.15896/21.01.018/2010-11 dated 08.04.2011, the net liability arising on exercise of second option by employees (other than separated/retired employees) is being amortized equally over a period of 5 years commencing from the year ended on 31.03.2011, and Rs.16.85 crore, being the proportionate liability in respect thereof, for the half year ended 30.09.2011 (Rs.8.42 crore for the quarter ended 30.06.2011) have been charged to Profit and Loss Account and the balance amount of Rs.117.87 Crore yet to be written off is carried forward to be amortized in future periods permitted by the said approval of RBI.
• The Scrip is hovering at Rs 385.50 on BSE

Federal Bank: Financial Results