Federal Bank conducted a
conference call on 16 October 2023 to discuss its financial results for the
quarter ended September 2023. Shyam Srinivasan, MD&CEO of the bank
addressed the call:
Highlights:
The bank has posted
the record high quarterly net profit and net interest income in Q2FY2024. RoA
and ROE continued to trend higher.
The bank has completed
significant capital raising in Q2FY2024, which would help to pursue growth opportunities.
The asset quality of
the bank is well under control under driven by improved risk management practices.
The environment continues
to be challenging, but the bank has made good progress on all counts.
The bank aims to grow
both deposits and good quality loan book.
Fee income trend is encouraging
and bank aims to move from pure lender to banker with focus on better risk
rated clients.
The share of fee
income has increased to more than 1% of assets.
The deposit environment
is challenging and it has not cooled off as yet. The bank expects the cost of
deposits may continue uptrend for next couple of quarters.
The bank has
exhibited marginal improvement in the margins in Q2FY2024 over Q1FY2024, while
the bank expects margins to further improve in H2FY2024. The bank expects full
year margin at 3.25% for FY2024.
The opex growth is
volume related and there is no one-off.
The bank expects credit
cost at 25-30 bps for next 2-3 quarters.
An incremental CRR had
an impact of 3-4 bps in Q2FY2024, which was offset by QIP capital raising.
The bank has
accelerated investment in branch expansion and brand building. Thus, the cost
to income ratio is expected to be sticky around 50% in FY25.
The LCR ratio stood
at 121%.
The bank remains focused on improving RoA to 1.4% by
FY2025, driven by increase in fee income, reduction in cost of deposits and rise
in share of higher yielding loan book.
The bank is confident of sustaining its growth
momentum and targets loan growth of 18-20% for FY2024.
The share of fixed rate loan book is 26%, EBLR is 51%
and MCLR 13%.
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