No Plans to Exit Insurance Biz; to Maintain Slippages at Rs. 240-250 Cr. Federal Bank

Federal Bank post a weak first quarter performance as net interest income (NII) declined 5 percent sequentially and there was
impact of higher provisions.Throwing more light on the numbers, Shyam Srinivasan, MD and CEO, Federal Bank said the fall in
net interest margins (NIM) was on a pre-guided large corporate account that slipped.

The private sector lender, reported 25.5 percent rise in its June quarter net profit at Rs 210 crore against Rs 167.31 crore posted during the same period last year. However, the number was below the Street’s expectations, which pegged the figure at Rs 250.5 crore.

For a normal quarter the slippages have been around Rs 250-260 crore but in Q1 it was around Rs 425 crore because of that large account. There was also a small uptick in retail and agri slippages. However, in terms of operating performance, it was one of the finest quarters in a long time both in terms of operating profit and growth. The operating strength of the bank is only getting
better, he assured.

The large account is a steel account in the East of the size of Rs 140 crore. He also reassured that the gross non-performing assets (GNPAs) and restructured book has been trending down and it did in this quarter as well. The incremental slippage is a
restructured account, said Srinivasan. The trend line of slippages has been in the tune of Rs 240-250 crore, and that will continue.

There could be a minor uptick of Rs 20-30 crore because of demonetization led retail accounts, but not that will not shift the trend line of slippage, he said.The loan growth is healthy across the spectrum and that will continue. In terms of retail disbursement it was an excellent quarter, said Srinivasan.

He also clarified, they will not be exiting IDBI Federal Life insurance business but the three partners are trying to come at the
value of the company because the JV agreement allow for the two domestic  partners to reduce their stake provided the international partner want to raise their holding. That process is underway, said Srinivasan.