Bad loans inched up to 1.7% in Q4.
Federal Bank profits plunged 44% YoY to $21.48m (INR 1.45b) in Q4 as inconsistent asset quality hurt earnings, according to Maybank Kim Eng.
Net NPLs inched up to 1.7% in Q4. The bank registered high slippages to 3.9% in Q4 brought about by seven bulky corporate loan accounts although there were some quarters where there were only a few cases of loans deteriorating into NPLs.
“Inconsistency in asset quality performance weighed on the stock which fell 12% after the results announcement. We cut our FY19/20E EPS forecast by 12/17% to build in higher credit cost at 90bps against guidance of 70bps,” analyst Vishal Modi noted.
Modi also forecasts that 50% of loans from outstanding standard restructured loans of $116.96m (INR7.9b) could easily slip into NPLs by FY19.
In a breakdown, corporate slippages accounted for 69% of total loans followed by 16% from the SME segment and 14% from farm and retail loans.
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