Incorporated in the year 1949, Federal Bank Limited is a major commercial private sector bank headquartered at Aluva in Kerala. With a vision of being the ‘Most Admired Bank’ which is digitally enabled, there is a sharp focus on Micro, Medium and Middle market enterprises. Out of the total 1252 branches in India, the southern states make up for 878 branches indicating a strong foothold (70.12%) in South India and a dominant presence (47.93%) in Kerala itself.
Led by a strong momentum in advances towards the corporate sector which grew by 38% YoY, Federal Bank’s loan book augmented to ₹ 733.47bn in FY17 (24.76% YoY). Advances towards the retail sector too increased at a healthy pace (26% YoY) while the prospects for SME sector advances remained positive marking a growth of 16% YoY. Federal Bank’s loan book has resisted the uncertainties of the economy due to which the credit requirements had suffered a setback in FY17 and their credit growth has been significantly ahead of the industry average. Federal Bank has been focusing on integrated offerings along the supply chain to create better value for SME clients. Also, the bank has been pursuing inorganic loan growth opportunities with emphasis on robust credit delivery and management through regional credit underwriting hubs.
CASA grew 23.85% YoY to ₹ 318 bn as CA increased by 27% YoY and SA increased by 23% YoY. Consequently, CASA as a share of deposits increased 13bps to 32.60% in FY17. Aided by the CASA growth, deposits augmented from ₹ 791.7bn in FY16 to ₹ 976.64bn in FY17. Consistent liability profile with a granular deposit portfolio remains core strength of the bank. Federal Bank focuses on growing low cost CASA which has been increasingly expanding.
Net Interest Margin (NIM)
Net interest margin of Federal Bank noted a positive movement from 3.1% in FY16 to 3.3% in FY17. With an impressive CASA as a share of deposits together with sustained spreads and strong bias towards retail funding, Federal Bank has been maintaining a stable trajectory of NIMs.
Asset quality improved significantly with both Gross NPA and Net NPA decreasing to 2.33% (51bps YoY) and 1.28% (36bps YoY) respectively. Provision coverage ratio decreased 30bps YoY to 71.75% owing to slippages staying at a low level. Segregation of sourcing and underwriting has led to high quality assets. With early warning and remedial management processes in place together with a dedicated team to look after the recovery of potentially risky assets, Federal Bank has been focusing on continuous improvement in asset quality. Diminishing slippages with increased recoveries and reduced write-offs signify betterment in asset lending policies.
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