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Federal Bank pegs FY20 credit growth at 16%, gross NPA ratio below 3%

Fresh slippages in third quarter include accounts like Dewan Housing Finance Corporation (DHFL) and Reliance Home Finance that were classified as NPAs in the third quarter.

January 20, 2020 / 06:06 PM IST
 
 
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Kochi-based Federal Bank said that it expects credit growth to be at 16 percent by end of current financial year after paring the target from 18-20 percent as set earlier.

"There could be some pent up demand in the fourth quarter but it is not likely to be a significant double digit high-teen growth. For the industry, credit growth of 10-11 percent is very likely," said Shyam Srinivasan, Managing Director, Federal Bank, adding that for the bank loan growth could be at 15-16 percent by year-end.

In the October-December quarter, Federal Bank posted loan growth of 13 percent, driven by growth of 13 percent in retail and 17 percent in agriculture loans. While the bank’s deposits grew at 10 percent, its Current Account Savings Account (CASA) ratio saw a decline of 189 basis points to 31.46 percent in the third quarter, from last year.

In terms of asset quality, the bank's gross non-performing assets (NPA) ratio eased to 2.99 percent in the third quarter, from 3.14 percent in the same period last year and net NPA ratio to 1.63 percent from 1.72 percent in the same period.

However, the bank’s slippages rose to Rs 593 crore in the October-December quarter, from Rs 540 crore in the previous quarter and Rs 426 crore in the same quarter last year. Fresh slippages include accounts like Dewan Housing Finance Corporation (DHFL) and Reliance Home Finance that were classified as NPAs in the third quarter.

The bank expects its gross NPA ratio to remain below 3 percent and has also maintained its credit cost guidance of 60-65 basis points by end of current financial year.

Srinivasan also said that the bank may look at raising capital via Tier-2 bonds in early 2021, in order to support growth. The private lender had raised Rs 300 crore via Tier-2 bonds in June 2019.

The bank’s capital adequacy ratio stood at 13.64 percent, with Tier-1 at 12.62 percent and Tier-2 at 1.02 percent as on December 31, 2019.

Federal Bank posted a net profit of 32 percent in the third quarter, on the back of higher other income and lower provisioning. The bank’s provisions fell to Rs 160.86 crore in October-December from Rs 190.12 crore in the same period last year.

Moneycontrol News
first published: Jan 20, 2020 05:18 pm

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