The Kerala-based Federal Bank is set to reach its target of raising over $100 million via foreign sources to take advantage of the concessional swap facility provided by the Reserve Bank of India (RBI) by November-end. The private sector lender has already brought in $70 million.
Shyam Srinivasan, MD and CEO, said the lender aims to bring in the rest before November 30, the last date set by the RBI for banks to swap dollar funds into rupee at 100 basis points or bps lower than the market rate under a special window.
“After swapping, the average cost of fund comes to around 8.75%,” he said, adding that the proceeds will be used for financing export credit and foreign currency credit.
The bank has also garnered Foreign Currency Non-resident (FCNR) deposits of $6-8 million though the focus continues to be on attracting more deposits domestically.
The RBI had introduced the special forex swap window last month in order to encourage banks to raise money abroad and use them for lending purposes within the country. The step is expected to help stabilise the rupee-dollar exchange rate.
Stock jumps 10% on Q2 results
Meanwhile, shares of Federal Bank rallied 10% to Rs78.40 per share on Monday in Mumbai on better-than-expected second quarter (Q2; July-September) results.
The bank’s net profit was up 5% to Rs225.8 crore supported by strong net interest income that rose 8.39% on-year to Rs548.35 crore.
Federal Bank reported a net interest margin (NIM) of 3.3%, higher than 3.13% in Q1. However, NIM declined from 3.58% in Q2 of last fiscal.
Srinivasan said that the bank aims to maintain margins around 3.3% for this fiscal.
The bank’s asset quality improved with gross non-performing assets (NPAs) ratio easing from 3.83% to 3.39% over the year. The net NPA ratio, however, worsened from 0.68% to 0.98%.
The bank staged a credit growth of 16% and deposit growth of 15% in Q2. Srinivasan expects loans to retail and small and medium enterprises or SMEs to continue growing at 24% by the end of this fiscal.
The bank’s gold loan portfolio which constitutes 13% of total loan book, shrunk marginally as the bank shifted its focus to recovering advances at the peak of gold prices during Q2. The bank aims to increase its proportion to total loan book to 15-18% by the year-end on the back of improved asset quality in the segment.