Federal Bank's major challenge has been its restructured book. But it has come down to Rs 1500 crore in the fourth quarter of FY16 from Rs 2300 crore.
The incremental provisioning for Federal Bank's new slippages is on a downward trend, said Shyam Srinivasan, Managing Director and Chief Executive Officer, Federal Bank.
"We do not have any large names [slipping into debt]. So, we exit the quarter well provisioned. Our main focus this year is going to be on growth," Srinivasan said. The extra provisioning is mainly for failed restructuring and old non-performing assets.
The bank's major challenge has been its restructured book. But it has come down to Rs 1500 crore in the fourth quarter of FY16 from Rs 2300 crore.
The bank's business is split equally between retail, SMEs and corporates.
Below is the verbatim transcript of Shyam Srinivasan's interview with Reema Tendulkar and Mangalam Maloo on CNBC-TV18.
Mangalam: Market is pained by the higher provisioning, the big write-off as well as the sales to asset reconstruction companies (ARCs), what is your defence?
A: If you looked at our provisioning, it is largely on account of what we think is the incremental provision for accounts that are already non-performing assets (NPA) or those that were in the failed restructured category. We had provided the overall number improvement on account of the fact that we had provided 100 percent and technically written off those accounts. So two components, one is the incremental provisioning for new slippages is trending down and that should be the trend hopefully as we go into FY17 largely because we don’t have any of the large house of debt names with us and over the many quarters those have been addressed quite vigorously.
So, we exit the quarter well provisioned with good momentum at operating performance. So, I am quite encouraged, after many quarters, we have exited with strong operating performance provisioning well fully done. So I look at FY17 as beyond provisions and focus on growth and I can explain that the provision is on account of the extra or incremental provisioning done on failed and restructuring our old NPAs.
Reema: What is the total amount of assets in your watch-list, basically the loans given to sub-investment companies, restructured loans, SDRs etc?
A: A large part of our watch-list was the restructured book. If you have noticed, our restructured book has come down to Rs 1,592 crore versus about Rs 2,300 crore. So the power exposure, which was one worry has address. The few steel accounts or metal accounts that were there, we have provided fully and moved on. So the large names that the industry is written in the last four-five years which has been bothering everybody, we don’t have exposure to that. In fact, if you have seen our debt, we have mentioned that in the business written in the last three-four years, we have no account in any either stressed or any watchful list. So I look at FY17 with those issues not staring at us.
Mangalam: You have also taken an non-performing assets (NPA) hit on your loans to distribution company (DISCOM) what is the residual provisioning you have to take on other DISCOM loans as well as the exposure to Punjab state food loans?
A: We had two big exposures, Rajasthan and Uttar Pradesh (UP). Both of which have been dealt within the quarter that went by, Rajasthan was not much of an issue, all of it was SDL or the remaining is standard in the case of the other one, we have provided 25 percent. So we don’t have an issue.
On food credit, we have made the provision that was required of us. Should Q1 also require the similar provisioning, we are prepared to do that. So outside of that we don’t have an issue in FCI or in the DISCOM bonds. I think we have mentioned that as well.
Reema: What is the split between your corporate and retail book right now?
A: For many quarters we have been almost a third-third-third between the three businesses, retail, SME and corporate. That trend will more or less continue, plus or minus a few basis points here and there because I think our definition of corproate is all exposure greater than Rs 25 crore and we are keen on playing the mid-market segment. If you have seen this quarter and in Q3, we saw significant growth.
Mangalam: What can you guide in terms of NPA levels in FY17?
A: I will go back to reflecting on trendlines, Q3 to Q4 so marked improvement both gross and net improved. We have guided by the fact that we don’t have any of the known, large, stressful accounts, so it should be more either a particularly geography related issue or the residual flow-through of anything. So I am not visualising anything very adverse. Slippages for the quarter should definitely improve. I had told you last quarter that it will be between Q3 and Q4 divided by two, we came close with that. So I would only say that we will keep that trend going.
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First Published on May 2, 2016 04:13 pm