About -
Federal Bank Ltd was incorporated in 1931 as Travancore Federal Bank Limited. It provides retail & corporate banking, para banking activities such as debit card, third party product distribution etc., treasury & foreign exchange business.
Federal Bank Ltd was incorporated in 1931 as Travancore Federal Bank Limited. It provides retail & corporate banking, para banking activities such as debit card, third party product distribution etc., treasury & foreign exchange business.
The bank has a strong retail funding franchise, including a stable base of NRI deposits, largely contributed by remittances from the expatriate Indian community in the Middle East.
Segment Break-up -
Federal Bank earns 60.2% from Retail Banking, 25.2% from Corporate & Wholesale Banking, 13.6% from Treasury & 1.1% from others.
Federal Bank earns 60.2% from Retail Banking, 25.2% from Corporate & Wholesale Banking, 13.6% from Treasury & 1.1% from others.
Financial Summary -
Q2FY23 (YoY)
Net Interest Income at ₹1762 Cr ⬆️19%
Operating Profit ₹1212 Cr ⬆️33%
Net Profit ₹704 Cr ⬆️53%
Broad based Loan Growth, Accelerated Fee Income & Strong Asset Quality results in "Highest Ever Net Profit".
Q2FY23 (YoY)
Net Interest Income at ₹1762 Cr ⬆️19%
Operating Profit ₹1212 Cr ⬆️33%
Net Profit ₹704 Cr ⬆️53%
Broad based Loan Growth, Accelerated Fee Income & Strong Asset Quality results in "Highest Ever Net Profit".
Asset Quality Trends -
Total stressed book steadily trending down & is at 1.98% of average total assets.
Provision Coverage Ratio up by 238bps to 67.41%.
Strong Recovery & Upgradation of 329 Cr in Q2.
Total stressed book steadily trending down & is at 1.98% of average total assets.
Provision Coverage Ratio up by 238bps to 67.41%.
Strong Recovery & Upgradation of 329 Cr in Q2.
Business Growth -
▪️Retail Banking:
~CV/CE Asset book up 63% YOY with 82% of the book qualifying under PSL. Activated CVCE business pan 🇮🇳.
~Retail Asset has grown at 18% YoY (Home loan -18%, LAP -15%, Auto Loan -26%)
~Gold Loans registered 21% YoY growth touching 19300Cr.
▪️Retail Banking:
~CV/CE Asset book up 63% YOY with 82% of the book qualifying under PSL. Activated CVCE business pan 🇮🇳.
~Retail Asset has grown at 18% YoY (Home loan -18%, LAP -15%, Auto Loan -26%)
~Gold Loans registered 21% YoY growth touching 19300Cr.
~MARG Business crossed Rs. 26,000 Cr milestone.
~Increased footprint in high margin MFI segment through BC delivery channels with monthly run rate crossing 100Cr/month.
~Debit Card Spend at YoY growth of 30%.
~Increased footprint in high margin MFI segment through BC delivery channels with monthly run rate crossing 100Cr/month.
~Debit Card Spend at YoY growth of 30%.
▪️Wholesale Banking:
~Corporate Banking book hit the milestone of 60000+ Cr & grew by 22% YoY with Transaction Banking & Trade mandates leading the way.
~Fee income up by 41% YoY.
~SCF business focus resulted in 61% growth in Dealer/Vendor finance during H1.
~Corporate Banking book hit the milestone of 60000+ Cr & grew by 22% YoY with Transaction Banking & Trade mandates leading the way.
~Fee income up by 41% YoY.
~SCF business focus resulted in 61% growth in Dealer/Vendor finance during H1.
Select Segments -
Federal Bank's select high yielding portfolio share in total advance up 20% in Sep’22. Rev share from these select segments increased 18%. MSME credit lines (BuB + CoB) up by 18% (YoY),CV/CE 64% (YoY), Credit Card 2601% & Micro Finance 128%.
Federal Bank's select high yielding portfolio share in total advance up 20% in Sep’22. Rev share from these select segments increased 18%. MSME credit lines (BuB + CoB) up by 18% (YoY),CV/CE 64% (YoY), Credit Card 2601% & Micro Finance 128%.
Distribution : Deriving Efficiency from Footprint.
~Opened 25 Branches in H1, with plans to open a total of 75 branches in FY23.
~Over the next 3 years, the outreach of the Bank would be increased by 250 branches outside Kerala.
~Opened 25 Branches in H1, with plans to open a total of 75 branches in FY23.
~Over the next 3 years, the outreach of the Bank would be increased by 250 branches outside Kerala.
Digital Migration -
~Digital Transaction have seen a 22% YoY growth.
~Mobile banking volume stands at 13,368 Cr, a 23% YoY growth.
~Digital share stands at 88% for the month of Sept 22.
~Digital Transaction have seen a 22% YoY growth.
~Mobile banking volume stands at 13,368 Cr, a 23% YoY growth.
~Digital share stands at 88% for the month of Sept 22.
Innovation & Growth through Partnerships-
Partnered with PaisaBazaar. PB is one of 🇮🇳’s largest digital marketplace for consumer credits, is expected to enhance the unsecured portfolio.
🤝with FPL Technologies popularly known as 'One Card' for issuing co-branded credit cards.
Partnered with PaisaBazaar. PB is one of 🇮🇳’s largest digital marketplace for consumer credits, is expected to enhance the unsecured portfolio.
🤝with FPL Technologies popularly known as 'One Card' for issuing co-branded credit cards.
Bank is live with 2 leading Fintech Partner (Fi & Jupiter).
More than 4.5L accounts are being opened every month by Fi & Jupiter.
Federal Bank, DGV & Amul 🤝to digitise the farmer milk payment cycle spread across 18000 milk societies & 36L farmers.
More than 4.5L accounts are being opened every month by Fi & Jupiter.
Federal Bank, DGV & Amul 🤝to digitise the farmer milk payment cycle spread across 18000 milk societies & 36L farmers.
Risks -
• The Bank is aggressively launching new products, the success and delinquencies there needs to be monitored.
• Any delay in the recovery, higher than
expected haircuts or sharp rise in the slippage could impact the profitability & business growth prospects.
• The Bank is aggressively launching new products, the success and delinquencies there needs to be monitored.
• Any delay in the recovery, higher than
expected haircuts or sharp rise in the slippage could impact the profitability & business growth prospects.
• Sudden decline in the market price of gold may adversely affect the bank's financial condition, cash flows & earnings as it may be unable to realise the full value of its pledged gold.
• Rise in interest rates may impact loan growth the bank has high retail facing loan book.
• Rise in interest rates may impact loan growth the bank has high retail facing loan book.
Concall highlights -
•Loan book is seeing broad based recovery & expects to grow by late teen digit for FY23. 10-12% of incremental deposits will be coming from the Fintech partnerships.
•NIM is expected to be 3.3% in FY23 compared to earlier expectations of 3.25%.
•Loan book is seeing broad based recovery & expects to grow by late teen digit for FY23. 10-12% of incremental deposits will be coming from the Fintech partnerships.
•NIM is expected to be 3.3% in FY23 compared to earlier expectations of 3.25%.
•Cost to Income ratio is expected to be around 48% level & improving by FY24E.
•Looking to add another 40-50 branches in FY23.
•So far there's no plan to raise capital as the bank feels that the CAR is enough to fund the expected credit growth for FY23.
•Looking to add another 40-50 branches in FY23.
•So far there's no plan to raise capital as the bank feels that the CAR is enough to fund the expected credit growth for FY23.
Conclusion -
Indian banking industry is at the cusp of credit up cycle. Back book clean has been almost done and recoveries pace
has accelerated. In FY22, the NPAs were at around 6 years low level & balance sheets are now adequately capitalised.
Indian banking industry is at the cusp of credit up cycle. Back book clean has been almost done and recoveries pace
has accelerated. In FY22, the NPAs were at around 6 years low level & balance sheets are now adequately capitalised.
The credit growth prospects look promising. To ride the growth we feel that Federal Bank is one of the best placed mid private sector bank. Balance sheet is now more resilient & lower exposure to contextually vulnerable segments will
help Federal Bank to become even stronger.
help Federal Bank to become even stronger.
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