Federal Bank and SBI Cards Quarterly Results - NPA provisioning

On 23 July, two financial stocks viz. Federal Bank and SBI Cards announced quarterly results. The common threat in both cases was the pressure on loan book created by COVID 2.0.

Federal Bank reported 2.28% rise in revenues at Rs.4,148 crore for the Jun-21 quarter. The actual growth came from other income as interest income was flat. Revenues from retail banking revenues were sharply higher but revenues from treasury operations and corporate banking were lower YoY. 

Profit after tax (PAT) for Jun-21 quarter fell by -12.88% to Rs.357 crore due to a 64% spike in loan loss provisioning at Rs.671 crore due to COVID 2.0 stress. Gross NPAs at 3.51% are relatively comfortable but were higher on YoY and sequential basis. The bigger challenge is the return on assets or the ROA which is extremely low at 0.17%, against a private banking average of 0.50%. Capital adequacy at 15.36% also needs urgent ramping up.

Check: HDFC  Bank Q1 results

SBI Cards & Payment reported 9.66% increase in revenues at Rs.2,362 crore for Jun-21 quarter. On a YoY comparison, the interest income was sharply lower by -18.5% due to lower interest yields. However, this was compensated by a 65% rise in fee income. Some respite came from the doubling of Other income in the Jun-21 quarter.

Net profit for Jun-21 quarter were down -22.55% at Rs.305 crore YoY due to the impact of asset stress on the profits. During Jun-21 quarter, SBI Cards saw gross NPAs spike from 1.35% to 3.91% while net NPAs spiked from 0.43% to 0.88% YoY. Expected credit losses in the Jun-21 quarter were flat at Rs.1,396 crore. Clearly, the asset quality stress appears to have been accentuated by COVID 2.0.