Federal Bank Disappoints With Q3FY13 Scorecard

Federal Bank, a Kochi-based private sector bank, came out its results for the quarter ending December 2012 post market hours today (Jan 17, 2013). Unlike some of its peers, the bank has disappointed with its result. Although the interest earned has increased by approximately 4% on a yearly basis to Rs 152.2 crore, the increase in interest expended by 9% in the same period was large enough to push the bank’s net interest income (NII) into the negative territory by 6%. This is starkly against the market expectation of a 6% increase in the NII. The interest expended for the quarter was Rs 102.4 crore.

Even in terms of asset quality, Federal Bank has been a letdown, with the increase in Net NPAs as a percentage of advances at 0.92% from 0.74% in the same quarter a year ago. However, there was a marginal improvement in the gross NPAs figure, which stood at 3.85% compared to 3.97% a year ago. If we look at the provisions other than tax and contingencies, it has declined by 35% on a yearly basis but doubled on a sequential basis to Rs 74.4 crore.

The lower provisions saved the day for the bank, helping it to post a net profit of Rs 210 crore that was up by 4% on a yearly basis to Rs 210 crore. It was Retail banking that led to the bank’s gross underperformance, as this segment saw a fall of 35% in its income.

The market seems to have sensed the result and the shares of the bank were down by 0.85%, closing at Rs 512. This is despite the fact that the BSE Bankex was up by 0.11%. Currently, the scrip is trading at around 1.4x its book value, which looks on the higher side. Therefore the stock will remain under pressure tomorrow.