Provisioning is lower in Q4 because we provisioned heavily in the first three quarters without taking any NPAs. When the NPAs became recognised in March, the provision was changed from regular asset provision to credit provision.
For the fourth quarter of FY21, Federal Bank announced its highest-ever quarterly net profit of Rs 477.81 crore. It also reported a net profit of Rs 1,590.30 crore for the fiscal year 2020-21. Excerpts from Shyam Srinivasan, MD & CEO of Federal Bank post-results virtual press conference.
Interest income has been stable, although other income has declined. Is the increase in net profit the result of reduced provisioning?
The bank’s other revenue has decreased since we had a fantastic one-time selling of portfolio investment in Q4 of FY20. Provisioning is lower in Q4 because we provisioned heavily in the first three quarters without taking any NPAs. When the NPAs became recognised in March, the provision was changed from regular asset provision to credit provision.
Could you please share your forecast for the next quarter and fiscal year?
It’s difficult to say at this stage. The next quarter seems to be very difficult. Q1 FY21 was difficult for both of us, but things picked up later in the year. Last year, it got off to a shaky start but finished on a high note. We have to assume that a comparable event would occur in this fiscal year as well.
Which industry has seen the most loan growth?
Except for our corporate loan book, our loan growth was diverse and important. The gold loan saw the greatest boost, increasing by 70%. Corporate loan book shrinks by almost 6%. Many NRIs have been laid off in the Middle East.
What are the prospects for remittances, considering that the bank has a sizable market share in overall remittances into the country?
In terms of remittances, we had the best year ever. In the previous fiscal year, total remittances exceeded 1,06,000 crore. As a bank, we have increased our market share over time. There are several explanations for the increase in remittances. Since the rupee has depreciated against the dollar, families have returned to India, with the earning participant remaining and sending more money back.
Is there an update on the credit card launch?
We are [launching] our credit cards, and we have started issuing cards to our employees. About 80% of our squad has been carded. We will be live with our current customers by the end of this calendar year, and then we will look beyond.
We expanded by 70% last year, which was very remarkable for us. It is still an attractive market. Such growth rates are not sustainable, both environmentally and in terms of our lower denominator. At this point, 25-30% growth is reasonable, and that is what we are aiming for. I assume that gold loans will increase in June-July as other credit lines begin to suffocate.