Federal Bank reported an 8.3% year-on-year decline in its net profit for the very first quarter. Following are excerpts from a post-outcome virtual press meet by Shyam Srinivasan, MD & CEO.
Provisioning is seen larger for the quarter. Are the slippages larger than the run-price?
Our provisioning policy continues to be incredibly conservative so that the balance sheet remains robust. It is a decision. For Rs 640-crore of fresh slippages in the quarter, we have provisioned Rs 460 crore as a decision. Even in gold loans, which is one hundred% safe, we have provisioned 65%. Our unsecured book is incredibly marginal. There is no lumpy slippages and it offers us the self-confidence.
Other earnings has grown sharply in the quarter.
We had a robust quarter in treasury and we had a one-off recovery in a significant account which was written off in the previous.
Your deposits and advances have de-grown sequentially.
We decreased our certificate of deposits by Rs 2,000 crore in Q1, whilst buyer deposits went up. The credit development is dependent on the atmosphere and we think that it will choose up from September onward and we will have a larger share.
What is the explanation for larger provisioning in the gold loan portfolio? It is regarded as a safe asset?
Our NPA% in gold is .3%. Our loan-to-worth (LTV) is 75-80% and it is manageable if costs fall is in that variety. In case it becomes NPA, we can effortlessly auction and gather our dues.
Any update on the credit card launch? How will you take it forward with the Mastercard problem?
We launched the credit card in June. Initial proposition was for current prospects and we saw superior traction in July. We have been a single Mastercard issuer and due to a current path from the RBI, we have stopped issuing cards to prospects from July 22. There are two other franchisees in the nation — Visa and Rupay, and in the next two months, we hope to be back in action.
Can you inform us about the stake sale to IFC? And is there any more stake dilution plans?
The approach is total as our board has authorized the allotment of shares to IFC. They have taken up 4.9% share of the bank. As far as incremental equity issuance, we are incredibly prudent about capital allocation and use, and in the last 10-12 years, we have accomplished only one QIP and IFC is the only other transaction. Our capital adequacy is robust and we are not searching something proper now. However, we have an enabling resolution passed.