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Mumbai, <keyword id="19913734" type="General" weightage="20" keywordseo="federal-bank" source="keywords">Federal Bank</keyword> on Tuesday reported 23 per cent increase in consolidated net profit at Rs 1,035.42 crore for December quarter 2023-24, helped by a sharp decline in provisions and also surge in non-interest income. On a standalone basis, the private sector lender's net profit in the quarter increased 25 per cent to Rs 1,007 crore, its highest ever. Core net interest income (NII) grew 8.53 per cent to Rs 2,123 crore, while the other income jumped 61 per cent to Rs 863 crore. The growth in the core NII was constrained because of narrowing of net interest margin at 3.19 per cent from the 3.55 per cent in the year-ago period, and the 18 per cent asset growth provided a limited succour. Chief executive and managing director <keyword id="20078868" type="General" weightage="20" keywordseo="shyam-srinivasan" source="keywords">Shyam Srinivasan</keyword> said the bank has posted 19 per cent growth in deposits by giving higher rates, but was quick to add that the deposit growth is from individual clients which will yield dividends over a period of time. He admitted that the bank has not been able to deliver on its guidance of expanding <keyword id="19936365" type="General" weightage="20" keywordseo="nim" source="keywords">NIM</keyword>s in the second half of FY24 due to the challenging external environment where funds are coming at a higher cost, and added that it will look at maintaining NIM at the 3.20 per cent level in the near term. He said the bank has been focused on the overall income growth from both interest and non-interest income lines, which has ensured that the overall business growth trajectory is maintained. Low-cost current and saving account deposit growth trailed at 8-9 per cent, and <keyword id="20079533" type="General" weightage="20" keywordseo="srinivasan" source="keywords">Srinivasan</keyword> said the Casa ratio is likely to come down further from the present 30.63 per cent. Srinivasan said the bank board has started the process to find a successor for him, and should be sending a list of candidates to the <keyword id="19922074" type="General" weightage="20" keywordseo="reserve-bank" source="keywords">Reserve Bank</keyword> by early May 2024. The board will look at external candidates as well, he said, adding that the bank has two exemplary executive directors as well who can be the internal candidate. The incumbent MD and CEO said he will not take up any role in the bank after his current term comes to an end in September after 15 years of service. Srinivasan said it is not a "good governance" practice to continue in any other capacity but added that he may look at some engagement with a subsidiary of the bank post-retirement. The bank will be opening 100 more branches in 2024, which is the same as in 2023, Srinivasan said. Replying to a question whether it will open a branch in Ayodhya and Lakshadweep, he asked all not to get "swayed" by the news cycle. On the asset quality front, the overall slippage increased to Rs 479 crore which was higher than the preceding quarter's, but within the broader target of maintaining it at Rs 1,800 crore for FY24, Srinivasan said, adding that till now the overall slippages is at Rs 1,300 crore in the first nine months. He added that the slippages were a bit higher in Q3 because of a lumpy Rs 70 crore account, and added that the account will get reversed to performing in Q4 itself. Gross non-performing assets ratio improved to 2.29 per cent from the year-ago's 2.43 per cent. Overall provisions decreased to Rs 91.22 crore from the year-ago period's Rs 198.69 crore, and helped the bottomline. The bank's overall capital adequacy ratio improved to 15.02 per cent as against 13.35 per cent in the year-ago period. The Federal Bank scrip shed 2.16 per cent to close at Rs 149.70 apiece on the BSE on Tuesday, as against a 0.27 per cent correction on the benchmark.

Federal Bank Q3 consolidated profit jumps 23% to Rs 1,035 cr

Mumbai, Apr 3 () South-based lender Federal Bank expects a few difficult months in the beginning of FY21 and a "vigorous catch-up" later, its Chief Executive Shyam Srinivasan said on Friday. In a letter to the bank's 12,000 staffers, Srinivasan also made it clear that the new world post the Covid-19 crisis will be different from what people are used to. "The first few months (Q-1?) may be a softer start and then a vigorous catch-up in the remaining quarters (this year). We should be nimble to readjust as the situation evolves," Srinivasan wrote. He also asked staffers to hold on to a host of virtues, including good habits on personal hygiene, good business practices, relationships with the society and family, and learning abilities developed during the lockdown. "We have to resolve to build extreme resilience as an institution and as life gets back to a new order (hopefully not too long from now), work hard at reimagining how we work and live," he said. Srinivasan made it clear that while the new world will be different, a newer way of thinking and working will be a pre-requisite to win in the changed circumstances. AA ABMABM

Federal Bank sees difficult start to FY21, followed by vigorous catching up

Mumbai, Jun 25 () South-based lender Federal Bank will be paying over Rs 80 crore to buy additional four per cent stake in its life insurance joint venture IDBI Federal Life Insurance, a top official has said. The stake buy from the state-run IDBI Bank will take Federal Bank's stake in the 12-year-old company to 30 per cent, the maximum permissible level for a lender under the regulations, its managing director and chief executive Shyam Srinivasan told . Without giving targeted timelines, he said IDBI Bank, which holds 48 per cent stake in the venture, will be selling 27 per cent stake in the venture to get its holding down to 21 per cent. Federal Bank will be purchasing 4 per cent, while their Dutch partner Ageas Insurance International NV will be buying 23 per cent to take its ownership to 49 per cent, the maximum permissible for a foreign partner in a life insurance venture. "The valuations have been decided between partners by appointing third parties. IDBI Bank will reduce either to 25 or 21 per cent depending on whether we buy or not," he said and added that "we will take our stake to the maximum permissible 30 per cent and it will take about Rs 80-90 crore for the 4 per cent stake." At the lower-end of the valuation hinted by Srinivasan, the total valuation of the insurer will come at about Rs 2,000 crore. Srinivasan said it is a good investment for the bank which can reap in benefits later but declined to answer whether they are looking at an eventual listing of the venture. The company has a good presence in the market and such a deal will be beneficial for all the stakeholders, he said. It can be noted that the transactions have been triggered primarily by life insurance behemoth LIC buying a majority stake in IDBI Bank last year, due to which the lender is reducing its 48 per cent stake in the venture. Srinivasan said the bank is presently in a capital conservation mode wherein it is looking at ways of conserving money, but stressed that increasing the stake is a good bet from a future perspective and also added that the amount to be invested at over Rs 80 crore is "considerably low". AA DRR DRR

Federal Bank to buy additional 4 pc stake in life insurance JV from IDBI Bank for over Rs 80 cr

Mumbai, Jul 5 () Federal Bank is focusing on safer gold loans amid the COVID-19 pandemic and hopes to grow faster than last year in the segment as demand for other credit slows down, a top official has said. The nod by the bank's board to raise up to Rs 12,000 crore capital is only an enabling resolution which will be taken to shareholders, and the bank will take a call on fund infusion only in early 2021, its managing director and chief executive Shyam Srinivasan told recently. The bank is targeting gold loan growth to touch 35 per cent during FY21 as against 29 per cent in FY20, Srinivasan said. At Rs 9,600 crore, the bank's gold loan book is about 8 per cent of the overall loan book, and there is ample room to grow it as the same was 15 per cent of the book at the peak, he said. When asked about the risks, he said the only challenge is around operational matters like checking gold for its quality and its security, and added that from a lending perspective, the bank does not go beyond 70 per cent on loan to value front. Gold loan growth in June quarter will alone come at 5 per cent despite the difficulties like lockdowns, and the ongoing 12-day shutdown in the key market of Tamil Nadu, he said. It can be noted that a lot of lenders are focusing on gold loans amid the present circumstances, wherein the rally in gold prices due to volatility in financial markets comforts the lenders, but Srinivasan said competition is not a big worry for the bank as it has a unique set of customers carved out. As for the overall loan demand and growth, he said it is taking time for picture to get clear as virus infections continue to grow, and hoped for some clarity to emerge only towards the end of the calendar year. The first half of the fiscal will be a difficult one, he said, referring to lockdowns and the subsequent impact on demand as the hindering factors, and added that the bank would grow its overall loan book by about 8 per cent in FY21 as against 11 per cent in FY20. He said the bank is focusing on government schemes-linked lending like the one to small businesses, which comes with a state guarantee. Srinivasan, however, declined to comment when asked if he fears deterioration in asset quality going forward, saying the picture will get clear only when the moratoriums get over. "September is the new March," he said, referring to the financial year-end month, which gives a clear picture of banks' books. "Borrowers were both willing to pay back and capable earlier. While the willingness to pay has only gone up because of the humility that the crisis has brought, are they capable?," Srinivasan asked, pointing to sagging business activity levels over the last few months. The bank is focusing on conserving its capital and innovating to save costs, he said. The bank's overall capital adequacy is healthy at over 14 per cent and will not require any infusion before early 2021, he said, adding that it has only taken an enabling resolution for fundraise and the same will be decided upon only in early 2021. AA RVK

Federal Bank bets on gold loans to drive credit demand in sluggish economy

<ul><li>The economic distress from the recent <keyword id="48088" type="COMPANY" weightage="20" keywordseo="floods">floods</keyword> in <keyword id="28504" type="LOCATION" weightage="20" keywordseo="Kerala">Kerala</keyword> is mounting. Total losses have been pegged at ₹210 billion. </li><li>A recent report by India Ratings predicts that two-Kerala based banks, <keyword id="6356495" type="UNKNOWN" weightage="20" keywordseo="federal-bank">Federal Bank</keyword> and South India Bank, could see a 20-25% surge in their <keyword id="142154" type="PERSON" weightage="20" keywordseo="bad-loans">bad loans</keyword> as a result of the floods. </li><li>Most of the banks in the region focus their lending on the two sectors that have been adversely impacted by the floods - SMEs and <keyword id="6355165" type="UNKNOWN" weightage="20" keywordseo="agriculture">agriculture</keyword>. </li></ul>The economic distress from the recent floods in Kerala is mounting. Total losses have been pegged at ₹210 billion. The state’s GDP for the current financial year is expected to fall by 1 percentage point. Insurers are readying a payout of ₹13 billion for motor and property claims alone. The national production of rubber and coffee is also expected to take a huge hit. And now, the balance sheets and financial strength of banks in the region are predicted to deteriorate significantly. Around five banks, including Federal Bank and <keyword id="125585" type="COMPANY" weightage="20" keywordseo="South-Indian-Bank">South Indian Bank</keyword>, are based in Kerala with a quarter of their loan book concentrated on the state. Infact, a recent report by India Ratings, predicts that Federal and South India could see a <a href="https://www.indiaratings.co.in/PressRelease?pressReleaseID=33662&amp;title=Market-Wire%3A-Lenders-with-Exposure-to-Kerala-Brace-for-a-Jolt-Amid-Floods">20-25% surge</a> in their bad loans as a result of the floods. Even microfinance institutions will see their operations affected owing to defaults. Last week, the CEO of Federal Bank, Shyam Srinivasan, said that the bank’s non-performing loans could rise by <a href="https://www.business-standard.com/article/markets/federal-bank-expects-bad-loans-from-kerala-to-go-up-20-30-says-md-ceo-118082200060_1.html">as much as 30%</a> within the next few quarters owing to its high level of exposure to the rubber and tourism industries. Most of the banks in the region focus their lending on the two sectors that have been adversely impacted by the floods - small and medium-sized enterprises (SMEs) and agriculture. While agricultural output in Kerala will most definitely take a hit in the near term, even small businesses will suffer due to the loss of inventory, property damage and irregularity in cash flows. This in turn, will inevitably affect the ability of farmers, agricultural collectives and small business owners to pay back their loans. To soften the blow to creditors in the agricultural sector, the government has allowed a one-year grace period for interest and five-year grace period for principal payments on these loans. So banks will not have to immediately recognise these accounts as stressed. In the short term, banks could see a windfall in deposits as a result of a spike in remittances to the state. The floods are expected to unleash a wave of payments from Indian diaspora to their families. The absolute value of remittances will also be given a boost due to the weak rupee.

Kerala floods could lead to a surge in bad loans at India’s regional banks

<keyword id="62549" type="UNKNOWN" weightage="20" keywordseo="Robotics">Robotics</keyword> and <keyword id="107950" type="TECHNOLOGY" weightage="20" keywordseo="artificial-intelligence">Artificial Intelligence</keyword> (AI) is slowly reducing job opportunities in the banking sector and several services that banks offered have been replaced by <keyword id="24019" type="PERSON" weightage="20" keywordseo="automation">automation</keyword> already. Thanks to ever enhancing information technology, you will see more robots and tech in banking sector doing the job humans used to do earlier. For instance, jobs such as passbook updating, cash deposit, verification of know-your-customer details, salary uploads are also going digital increasing job redundancies. Several banks such as <keyword id="6355975" type="CITY" weightage="20" keywordseo="Axis-Bank">Axis Bank</keyword>, ICICI Bank and <keyword id="6357149" type="CITY" weightage="20" keywordseo="HDFC-bank">HDFC Bank</keyword> are pushing the boundaries of technology by implementing robotics to centralise operations and for quicker turnarounds in things like loan processing and selling financial products to customers. "Look at the quintessential cheque book request, today 75% of that happens digitally. Earlier, these customers used to walk into our branches. There is increased automation within branches. We have more than 1,500 cash deposit machines, so why do I need a teller,” Rajiv Anand, head - retail banking at Axis Bank, told ET. Also, it used to take five people to do monthly salary upload job. But now, it has also got automated. "Low-end back office jobs like data entries will no longer be required in the next three years. The rate of growth of new jobs in the banking sector will definitely come down,” Saurabh Tripathi, senior partner and director at BCG, told ET. HDFC saw staff strength fall for two-quarters in a row. The employee count fell by 7% to 84,325 in the quarter ended March 2017 from 90,421 in December 2016. Automation does not necessarily mean that there would no more be banking jobs. But they will be at a different level. Banks need to approach customers and educate them about financial products that are in the market. "Footprint increase is not the number one priority in absolute branch strength. Increasing reach and distribution is our priority. Reach and distribution we will increase through digital and more feet on street and relationship managers of the bank,” Shyam Srinivasan, CEO at Federal Bank, told ET.

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Federal Bank Q3 consolidated profit jumps 23% to Rs 1,035 cr

PTI

Federal Bank sees difficult start to FY21, followed by vigorous catching up

PTI

Federal Bank to buy additional 4 pc stake in life insurance JV from IDBI Bank for over Rs 80 cr

PTI

Federal Bank bets on gold loans to drive credit demand in sluggish economy

PTI

Kerala floods could lead to a surge in bad loans at India’s regional banks

Dilsher Dhillon

Automation has started eating up jobs at top banks. Here’s what has been replaced so far

BI India Bureau

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