Control on cost of funds lead to a strong show from Federal Bank's net interest margins (NIMs) as the lender reported a 12-quarter high. Shyam Srinivasan, MD and CEO of Federal Bank said that the bank could sustain these margins going forward.
"We have been guiding it for quite some time. It is driven by the business mix shift. We have tried to retailise the franchise, we have tired higher margin businesses and most importantly our low cost deposit growth is quite spectacular. So driven by the mix change, liability business more granular, and our portfolio quality is strong, so the reversal of interest income was also quite muted. So the blend, maybe this quarter a little more flattering at 3.22 percent. We would be somewhere in the 3.17-3.20 zone – that has been the improvement last year same time. At the beginning of the calendar year 2020, it was about 3.04 percent, it has been moving quite steadily," Srinivasan told CNBC-TV18.
On asset quality, he said, "In a normal year, for the last 3-4 years, we would have slippages of about Rs 1,500-1,600 crore in a full year. For the [past] nine months, it has come to about Rs 1,000 crore. It is not very different, in fact slightly better than the years that have gone by. I think that should continue and it looks sustainable."
Going forward, Srinivasan expects credit growth to be around 8-10 percent. "The full year loan growth we do believe will be between 8-10 percent depending on how the next 70 days go. So, if it is going to be full year 8-10 percent, then last quarter has to be quite strong which reflects the underlying momentum. If you take Q3, every sequential month we saw pick up. In most businesses December was 120 percent of January. If that run rate continues, we do believe credit growth should be between 8-10 percent," he said.To know more watch the video.