Federal Bank, one of the largest old private sector bank has reported a 32% jump in profits backed by a sharp rise in operating margins. The bank's profits in the fourth quarter however dipped by 46%.
(Rs m) | FY00 | FY01 | Change | 4QFY00 | 4QFY01 | Change |
Interest Income | 8,818 | 9,192 | 4.2% | 2,332 | 2,425 | 4.0% |
Other Income | 1,323 | 1,251 | -5.4% | 534 | 511 | -4.2% |
Interest Expenditure | 7,015 | 6,822 | -2.7% | 1,738 | 1,854 | 6.7% |
Operating Profit (EBDIT) | 1,803 | 2,370 | 31.4% | 595 | 571 | -4.0% |
Operating Profit Margin (%) | 20.5% | 25.8% | 25.5% | 23.6% | ||
Other Expenditure | 1,772 | 1,750 | -1.2% | 531 | 499 | -6.1% |
Profit before Tax | 1,355 | 1,870 | 38.0% | 597 | 584 | -2.3% |
Provisions & Contingencies | 811 | 1,033 | 27.4% | 254 | 348 | 37.2% |
Tax | 80 | 227 | 183.3% | 30 | 67 | 122.0% |
Profit after Tax/(Loss) | 464 | 610 | 31.6% | 313 | 169 | -46.2% |
Net profit margin (%) | 5.3% | 6.6% | 13.4% | 7.0% | ||
No. of Shares (eoy) | 22 | 22 | 22 | 22 | ||
Diluted Earnings per share* | 21.4 | 28.1 | 57.7 | 31.0 | ||
P/E (at current price) | 1.8 | 1.6 | ||||
*(annualised) |
The sharp drop in profits in fourth quarter is attributed to higher tax and provisions apart from fall in operating margins. Other income too registered a negative growth of 4%.
The bank's topline growth of 4% was disappointing. This was due to comparatively slow growth rate in advances and deposits which rose by 20% and 19% respectively. Priority sector advances contributed 62% of the net bank credit against the RBI stipulated mark of 40%. Also, its credit to deposit ratio of 64%, was much above its peers in the banking sector. These factors had contributed in increasing the provisioning requirement for non-performing assets. The amount of provision in the fourth quarter rose by 37% to Rs 348 m. The bank's ratio of net NPA to advances was over 8% as on March '00.
During the year Federal Bank has successfully reduced the cost of deposits by 85 basis points to 9%. This has resulted in the sharp rise in operating profits margins. Its interest spread of 4.5% is comparable amongst the best in the industry.
At the current market price of Rs 50 Federal Bank is trading at a P/E of 2 times and Price/Book value ratio of just 0.3 times. The reason for bank's lower valuations are its comparatively high NPA ratio and regional nature. Provisions for non-performing assets was more than 25% of networth in the current year. Also, it is a regional bank with most branches located in Kerala, out of the total 400 branches.
The BSE BANKEX Index Down at 36,433 (down 2.8%). Among the top losers in the BSE BANKEX Index today are RBL BANK, AXIS BANK and FEDERAL BANK. Meanwhile, the BSE Sensex has plunged 1.3% to 49,677.
For the quarter ended December 2020, FEDERAL BANK has posted a net profit of Rs 4 bn (down 8.3% YoY). Sales on the other hand came in at Rs 35 bn (up 3.9% YoY). Read on for a complete analysis of FEDERAL BANK's quarterly results.
For the quarter ended September 2020, FEDERAL BANK has posted a net profit of Rs 3 bn (down 26.2% YoY). Sales on the other hand came in at Rs 35 bn (up 7.2% YoY). Read on for a complete analysis of FEDERAL BANK's quarterly results.
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