Federal Bank expects double-digit growth in FY22

The bank is likely to raise capital in the second half of 2021 and is also planning to come out with a credit card of its own.

Federal Bank expects to grow by 8 % this fiscal and achieve double-digit growth in FY22 with the economy picking up. Shyam Srinivasan, MD & CEO of Federal Bank, told FE that growth is broad-based and advances are seen increasing in all sectors except large corporate loans.

“So far this fiscal we have grown around 6%. Products like gold loans have done extremely well. Business and commercial banking is growing and home loans have started picking up in Q3. Auto loans have done well in select geographies,” he said.

“Only in large corporate loans, we have seen a de-growth in Q3. Going into Q4 and as the economy picks up we see opportunities in this sector. Normally we have grown by 1.6-1.8 times the industry average, and if India grows meaningfully next fiscal, we should grow by 16-18 % in FY22,” he added.

The Kerala-based lender had reported that in Q3 total advances grew by 6%, while large corporate loans of `25 crore and more reported a decline of 7% year-on-year (y-o-y). Retail advances grew by 16% y-o-y in Q3, while agri loans reported a growth of 24 %.

The bank reported a third-quarter net profit of Rs 404.10 crore. On the asset quality, the lender said that the proforma slippage for the whole fiscal would be as normal as any business year. The proforma slippage for the first three quarters is Rs 1,000 crore and for the fourth quarter, it would be around Rs 400 crore. Total slippage of Rs 1,400 crore is normal in a year,” he said.

Federal Bank also reported that restructuring will be lower at Rs 1,500 crore as against the earlier estimate of Rs 3,500 crore with most customers doing better and not opting for it. “We thought earlier that restructuring would be much higher due to the Covid impact. Thankfully it is at a much lower level. If the customers service their dues in the next 2-3 years, the Covid impact will be sorted out. We have also provisioned adequately for it,” he added.

The bank increased the provision coverage ratio by 1245 bps to 77.10%. The provision coverage ratio including the proforma slippages would have been 66.12%.

Regarding branch expansion, Srinivasan said that the bank has plans to remain branch light and distribution heavy.
“In the last five years, we have added only 20 branches, while in my first five years we added 700 branches. We have added a lot of distribution in the likes of relationship managers and digital distribution,” he said. The bank has 1284 branches.

“Federal bank is a high-quality digital franchise and we are working towards achieving consistency in delivery. We want to be a bank which is a consistent performer in the long-run like Dravid and Roger Federer,” he added.

The bank is likely to raise capital in the second half of 2021 and is also planning to come out with a credit card of its own.