Federal Bank says restructured book to perform better than expected

The bank’s asset quality improved sequentially with gross NPAs at 2.46 percent of the loan book compared to 2.69 percent in the previous quarter. Net NPAs and net NPAs as a percentage of net advances stood at Rs 1,262.35 crore and 0.78 percent, respectively, the bank said.

Total advances increased 19.4 percent to Rs 1.64 lakh crore as of September 30, 2022.​

Responsible growth 

The bank is also calibrating its deposit growth to ensure that credit requirements are well funded at a time when there is a “war” for deposits across the banking sector, Srinivasan said.

“Our deposits will be responsibly grown; we won’t be very courageous to throw rates around, and we will be very practical about it to meet our own credit requirements,” Srinivasan said at a virtual press briefing after the bank’s July-September earnings announcement.

The bank has no plan to raise capital in this financial year and remains well funded, he added.

Credit growth in FY23 should be in the “high teens,” and deposit growth in the “pre-teens,” or in a 10-to-12 percent range, Srinivasan said.

In an interview with Moneycontrol in May, Srinivasan had guided for credit growth of 15 percent in FY23.

Also read: Federal Bank reports highest ever net profit at Rs 704 cr; stock surges

Scramble for deposits 

Srinivasan’s comments come at a time when banks are scrambling to mobilise deposits as banking system liquidity tightens even as demand for credit rises.

Credit growth in India has been robust despite the Reserve Bank of India embarking on a rate hike cycle in May. While banks typically pass on rate hikes to loan customers, the pass-through to depositors comes with a lag.

In that sense, the bank has a bulk of its loan book linked to the external benchmark, the MD said. Federal Bank is targeting a net interest margin of between 3.27 percent and 3.30 percent in the full year, added Srinivasan.

Merger speculation

Srinivasan brushed aside talk about Federal Bank merging with any other bank or entity. Recent news reports have claimed that the lender is holding initial merger talks with Kotak Mahindra Bank.

“In my 12 years (experience), I (Federal Bank) have been bought and sold 12 times,” Srinivasan said. “Even if there was such talk, this is not the right platform to share.”