Analyst Meet / AGM     18-Jan-24
Conference Call
Federal Bank
Expects touch RoA of 1.4% by FY24 and further to 1.5% in next 18 months

Federal Bank conducted a conference call on 16 January 2024 to discuss its financial results for the quarter ended December 2023. Shyam Srinivasan, MD&CEO of the bank addressed the call:

Highlights:

The bank has achieved four digit net profit for the first time, while the net interest income also touched all time high in Q3FY2024. The bank would work with this as a new base and improve ahead.

The bank added 65 new branches in 9MFY2024 with 30 new branches added in Q3FY2024.

The RoA and ROE of the bank is in line with strategy.

The subsidiary of the company - Fed Fina Financial Services was listed in Q3FY2024, which contributed gains of Rs 80-90 crore.

The bank is witnessing strong business growth with new businesses also doing well. The bank expects to repeat same underline business growth in Q4FY2024.

The environment has been challenging and the bank expects it to remain challenging in terms of high cost of deposits.

The credit quality was impacted to slippage of one large account with the exposure of Rs 70 crore. However, the account has been upgraded in Q4FY2024.

The bank expects some challenges like AIF impact, higher cost for pension and employee etc in Q4FY2024.

Bank is not overheating on credit deposit ratio front and credit deposit ratio is in early 80s. The bank aims to reduce it closer to 80% in 2024. The bank do not expects this to have impact on growth.

The bank aims to maintained net interest margins at current levels.

The focus is on delivering healthy RoA and RoE. The bank expects RoA to reach 1.4% by end FY2024 and expects to improve RoA to 1.5% in next 18 months.

The bank had created provisions for wage revision at the rate of 15%, which was raised to 17% in Q3FY2024

The provisions on restructured loan book stands at 20% end December 2023. The bank has reversed some restructured assets provision on satisfactory performance of restructured loan book under restructuring framework 1.

The bank expects recoveries from ADAG group related accounts in Q4. The NBFC exposure is Rs 100 crore and other accounts is Rs 180 crore.

CRAR of the bank is higher at 16.15-16.2% after adding 9M profits.

With regards to risk weights hike for NBFC lending, the bank has raised lending rates up to 30-40 and upto 50 bps depending in rating on new originations.
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