In an interview to CNBC-TV18, Shyam Srinivasan, MD & CEO, Federal Bank spoke about the latest happenings in the company and the road ahead.
He expects the bank's net interest margin (NIMs) to remain stable in the range of 3.3-3.35 percent in FY15
Kerala-based Federal Bank reported a rise of 24.94 percent in net profit at Rs 277.29 crore in Q4FY14 versus Rs Rs 221.94 crore posted in the same quarter a year ago. Its total income during the last quarter of FY14 rose to Rs 2,017.12 crore, from Rs 1,780.31 crore a year earlier.
Banking on the retail and SME segments, Srinivasan expects the credit growth momentum to continue going ahead.
Meanwhile, he added that the private sector lender is well capitalized and is not looking to raise funds at this point of time.
Many broking firms are bullish on Federal Bank. At 10:37 hrs share of Federal Bank was quoting at Rs 119.50, up Rs 3.10, or 2.66 percent.
Below is the verbatim transcript of Shyam Srinivasan's interview with CNBC-TV18's Latha Venkatesh and Sonia Shenoy.
Latha: You are getting a lot of positive adjectives from a lot of brokerages. Tell us the situation on the ground. Is optimism from the political firmament sipping down to your borrowers as well; is the quality of assets positively?
A: It is too early to comment on how consumer behaviour or large clients' behaviour will change. Yes, the decisive mandate has signaled a very positive sentiment, which is evident from the more leading indicators. But I would hold my horses till we see activity on the ground dramatically changing, which may at least a couple of quarters because people will look for the real cues. However, the sentiment is much more positive and that hopefully will reflect in outcomes in the coming quarters.
Latha: Your asset quality even in the Q4 had shown distinct improvement, the gross non performing loans (NPLs) that you added actually fell, the total stock fell. It is two months into the new quarter as well. Are you getting a sense that things are improving anyways structurally with or without the political catalyst?
A: I mentioned earlier, through the worst period our credit quality kept improving, so I see no reason why it shouldn't in a relatively more enthusiastic environment. In this quarter, I do not see any adverse outcome. I see the improvements we have put in place holding and that should sustain, the environment, the tailwind should help. But on our portfolio I would say that we have been quite harsh on ourselves in holding out on some of the credits that look stressed, so we are reasonably okay now.
Sonia: On your net interest margin front for this fiscal what kind of trajectory do you expect because many analysts believe that you will be closing down the gap with many of your larger peers on account of the deposit cost and the yield stability and also the credit cost situation improving? What kind of net interest margin trajectory can we expect from Federal Bank?
A: We are looking at something between 3.3 and 3.35 at this point in time for the year. If there is a sustained improvement we can look at that improving. This 3.3-3.35 would be on the back of increased volumes, better current account-savings account (CASA) and importantly lowering credit cost should be our focus and we will be on course for that.
Latha: What kind of growth are you expecting in loans, total book expansion?
A: Retail and small and medium enterprises (SME) is more sustained and predictable. We will keep the momentum which we had last year. The SME in particular was in mid-30s and retail ex-gold was in high teens. We will step that up both in retail ex-gold and with gold. SME in mid 30s will be a good outcome. A large corporate, I would look for more sustained environment improvement, big projects going on stream – that to me is the biggest outcome if this stable government is able to initiate activity which unlocks the mega projects that are stuck, I see us getting a share of it. So, I would believe that that part may take another couple of quarters to see a more predictable flow. Our pipeline looks reasonably okay.
Latha: Will you need capital?
A: No. we are very well capitalised and almost all of that is tier one, so we are not looking at raising any money.
Latha: Speaking about seminal quantum in jump in growth, you are provided for the current year even if there is an unexpected dramatic jump in demand for loans?
A: We are good for 25-30 percent growth for couple of years.
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