Private lender Federal Bank is targeting a credit growth of 15 percent for this financial year that began April 1, its managing director and chief executive officer said on May 6.
“In a rising rate environment, where people expect interest rates are going to head higher, normally the pickup in credit in the earlier period is higher. So, in a healing, recovering economy which is stimulated by government and regulatory initiatives, I do think, in the next two-to-three quarters credit growth will be picking up,” Shyam Srinvisan told reporters in a virtual media briefing post January-March results.
“A bank like us should see credit growth of around 15 percent for Fy23,” he added.
The comments come days after the Reserve Bank of India-led Monetary Policy Committee hiked the benchmark repo rate by 40 basis points to 4.40 percent to combat rising price pressures. Banks typically transmit the impact of higher interest rates to borrowers by increasing the lending rate.
Forty-six percent of Federal Bank’s loans are linked to an external benchmark, while 18 percent of loans are linked to the marginal cost-based funding rate.
Srinivasan added that the bank’s credit is in “reasonable shape,” adequate provisions in place and that the bank’s liability franchise should “power up” in this financial year. The bank is also well capitalised, with a capital adequacy ratio at 15.77 percent as on March 31, up by 115 basis points year-on-year, he added.
The nature of the bank’s underwriting standards have helped it maintain its asset quality even in “uncertain times,” Srinivasan said.
“We don’t see our asset quality jumping off the current run rate,” the managing director added.
The lender aims to make sure its loan-book mix is margin accretive, he said.
When asked about the status of the initial public offering of Federal Bank’s arm, Fedbank Financial Services, Srinivasan said that papers have been filed with the Securities and Exchange Board of India and approvals are expected to come in the next two-to-three weeks.
Q4 Earnings:
For the January-March quarter, Federal Bank reported a 13 percent growth in net profit year on-year. Net profit, as on March end, stood at Rs 541 crore, up from Rs 477.81 crore in the same quarter of the previous financial year. Net interest income grew 7.38 percent to Rs 1,525.21 crore, as against Rs 1,420.37 crore last year.
Provisions and contingencies dropped 70.4 percent to 75.24 crore as on March-end, down from Rs 254.49 crore a year ago. The Provision Coverage Ratio was at 65.54 percent as on March 31.
The bank’s gross non-performing asset ratio was at 2.80 percent, from 3.06 percent as on December-end and 3.41 percent a year ago. Net NPA ratio stood at 0.96 percent, from 1.05 percent in the prior quarter.Download your money calendar for 2022-23 here and keep your dates with your moneybox, investments, taxes