The Board of Directors of Federal Bank met on 31^st July 2008, and approved the Bank’s unaudited financial results for the first quarter of the current financial year.

The bank has shown a robust performance for the quarter ended June 30, 2008, with the Operating Profit increasing by 34.55 % to Rs. 253.52 Crores and Net Profit increasing by 1.81 % to Rs.68.15 Crores on a y-o-y basis, despite the increased provisions on investments. The total income for the fiscal increased by an impressive 27.53 % from Rs. 659.70 Crore to Rs. 841.33 Crore, supported by a 32.67 % growth in total business. The total business of the Bank crossed Rs 47000 crore. The Bank has once again exhibited consistent growth in profitability and in net interest income during the period. The Net Interest Income increased by 47.38 % to Rs. 278.19 Crore. The net interest margin (NIM) of the Bank increased from 3.49 % as on 31.3.2008 to 3.80 % as on 30.6.2008.

The ratio of net NPA, return on assets, and capital adequacy are at 0.46 %, 0.84 % and 20.74 % respectively. The Earnings Per Share and Book value per share is at Rs. 15.94 (annualised) and Rs. 233.51 respectively as at June 30, 2008. 

 Working Results at a Glance

3 months ended 30.06.2008 vs 3 months ended 30.06.2007

·Operating Profit increased by 34.55 % from Rs.188.43 Cr  to Rs. 253.52 Cr

·Net Profit up  by  1.81 % from Rs. 66.94 Cr  to Rs.   68.15 Cr

·Total Income increased by 27.53 % from Rs. 659.70 Cr to  Rs. 841.33 Cr

·Total Interest Income up by 34.20 % from Rs. 555.22 Cr to Rs. 745.12 Cr

·Net Interest Income up by 47.38 % from Rs. 188.76 Cr to  Rs. 278.19 Cr

·Non-Interest Income down by 7.92 % from Rs.104.48 Cr to   Rs. 96.21 Cr

·Net Interest Margin (NIM) at   3.80 % 

3 months ended 30.06.2008 vs 3 months ended 31.03.2008

·Total Business up by 21% from Rs. 44818 Cr to Rs. 47178  Cr

·Total Deposits increased by 15.12 % from Rs 25913 Cr to  Rs. 26893 Cr

·Total  Advances increased by 29.19 % from Rs 18905 Cr to  Rs. 20285 Cr

·Net NPA at 0.46 %

·Earnings  Per Share (annualised) at Rs. 15.94

·Book  Value  of  share  increased to Rs. 233.51

Growth in Total Income

For the quarter ended June 30, 2008 the Bank earned a total income of Rs. 841.33 Cr, registering a growth of 27.53 %, as against Rs. 659.70 Cr recorded for the corresponding period of the previous fiscal. The impressive growth in total income was due to the increase in interest income, despite a decline in trading income from Securities and Equity portfolio. The prudent asset liability management initiatives followed enabled the Bank to improve its NIM to 3.80 %. The focus was more on growth in low cost retail deposits across branches than on purchased funds, resulting in a reduction in the cost of deposits over March 2008.

The interest income from advances and investments grew by 35.94 % and 34.25 % respectively supported by strong asset growth. The Net Interest Income (net of interest earned less interest expenses) for the period showed a growth of 47.38 % on a y-o-y basis. Although the aggregate non-interest income registered a negative growth of 7.92 % during the quarter, the fee income increased by 75 % supported by fee & commission income, Remittance business, distribution business, Cash Management Business, Depository business, etc.

Though there was significant increase in the other operating expenses due to the branch expansion and migration of operating system to CBS, the Bank could contain the cost to income ratio at 32.28 % as against 35.74 % in the previous fiscal, which is one of the lowest in the industry.

During the first quarter, investment provision amounted to Rs. 131.79 Cr on account of depreciation of investments held in trading book (AFS and HFT). This higher provisioning in the portfolio has affected the growth in net profit during the first quarter.

Business Growth

Total business of the Bank reached Rs. 47178 crore, showing an increase of 32.67 % from that of the previous fiscal. Total deposits increased by 28.72 % to Rs. 26893 Cr and advances by 38.29 % to Rs 20285 Cr as on 30th June 2008.

The growth in advances was mainly driven by retail and SME advances. The retail advances of the Bank comprising of various retail loans products extended to individuals grew by 36.58 % on y-o-y basis and reached Rs. 5940 Cr forming 29.28 % of the total advances. The Bank has begun building a retail asset franchise in a big way. The wholly owned subsidiary- Fedbank Financial Services Ltd, sources retail assets for the Bank in all major cities and now we are one among the top five retail assets lenders, particularly to home loans for actual users.

The advances to priority sector reached Rs. 10134.60 Cr as on 30th June 2008 from Rs. 6236 Cr as on 30th June 2007, thereby recording an impressive growth of 62.52 %. The share of priority sector lending increased to 49.95 % as on 30.6.2008 compared to   42.51 % as on 30.06.2007. The bank's total agricultural loan portfolio registered a growth of 18.47 % on a y-o-y basis and reached Rs 2838.50 Cr. on 30.6.2008. Share of Agriculture lending in Adjusted Net Bank Credit (ANBC) was 15.01 % as on 30.6.2008. 

Net worth and Capital Adequacy

The Capital Adequacy Ratio of the Bank as on June 30, 2008 is at 20.74 %, against the regulatory minimum of 9 %. The Tier-1 (core CRAR) is at 17.84 %. Bank holds Rs.189.72 Crore in Investment Fluctuation Reserve to take care of the depreciation in the HTM category, though this is not required to be kept as per RBI guidelines. The Bank is fully prepared to move to Basel II .

Asset Quality

The Gross and Net Non-Performing Advances as on June 30, 2008, as percentage to advances were at 2.64 % and 0.46 % respectively as against 2.93 % and 0.37 % as at the end of June 30, 2007. The total provisions held against non-performing advances as a percentage of Gross NPAs (Provision coverage of Gross NPAs) amounted to 82.36 % as on June 30, 2008.

Branch Network

The total number of branches and ATMs had increased to 606 and 559 respectively, as on date. The Bank will continue to open more branches and ATMs in this financial year, in line with its organic growth plans.

Operating Efficiency and Productivity

The business per employee and profit per employee as on June 30, 2008 has moved to Rs. 669 Lacs and Rs. 3.88 Lacs respectively from Rs. 533 Lacs and Rs. 4.05 Lacs as on June 30, 2007. The cost to income ratio improved to 32.28 % from 35.74 % in June 2007.

Increase in shareholders’ value

The earning per share (EPS) and book value per share as on June 30, 2008 stood at Rs. 15.94 and Rs. 233.51 respectively as against Rs. 31.28 and Rs. 183.31 respectively as at June 30, 2007.

Sourced from: Federal Bank