Award for Federal Bank

Federal Bank has received Global CSR Award for ‘Best Corporate Social Responsibility Practice Overall.' The award was received by Mr Antu Joseph, Deputy General Manager of the bank, from Dr M. Veerappa Moily, Union Minister of Corporate Affairs. The award is a reflection of the bank's initiatives to treat the society as an integral stakeholder and is a testimony of the various steps taken by the bank in the fields of healthcare, education, and development of agricultural infrastructure.

Federal Bank announces scholarship programme

Fedbank Hormis Memorial Foundation, the public charitable trust formed by Federal Bank to perpetuate the fond memories of its founder K.P. Hormis, has invited applications for the Foundation's scholarships for the year 2011-12.

Students of Indian origin studying in Kerala and Tamil Nadu in any of the Government/Aided/ self-financing colleges are eligible for reimbursement of 100 per cent of tuition fees, subject to a maximum of Rs 75,000 a year. The courses eligible for the scholarship are Medicine (MBBS); Engineering (BE/ B.Tech); Agriculture (BSc); Nursing (BSc) and MBA.

For applying for scholarships, the student should have secured admission under merit list during the academic year 2011-12.

Family income of the student should be below Rs 2.50 lakh. Ten students in each discipline will be offered the scholarship, of which, one seat will be kept aside for a physically challenged student.

Federal Bank net jumps 41%; NRI deposits up

The net profit of Federal Bank spurted by 41 per cent to Rs 202 crore for the quarter ending December 31. The bank delivered substantial topline and bottomline growth despite a challenging macro environment, both in the domestic and global market, a press release issued here said.

The bank, which had been working on its transformation to a truly pan-India status while adopting contemporary management techniques, has reported excellent numbers which not only reflect rapid growth but also asset quality.

The total business grew by 22.7 per cent to touch Rs 79,948 crore. Total deposits increased 26.6 per cent to Rs 46,742 crore. While retail deposits expanded 27.2 per cent to Rs 38,678 crore, NRI deposits grew faster at 35.4 per cent to Rs 10,546 crore.

Deposit growth

The fall in the rupee value and spurt in interest rates for NRI deposits seem to have helped accelerate the volume of NRI deposits. The low-cost CASA deposits grew by 21.9 per cent to Rs 13,186 crore.

CASA growth improved the net interest margin and enabled the bank to report a better bottomline. The net interest margin for the quarter was at 3.94 per cent. Net advances grew by 17.5 per cent to Rs 33,206 crore, boosted by increased lending to SME, corporate and retail segments. Retail advances form 28.7 per cent of all advances while SME lending formed 28.7 per cent.

The bank said it had contained gross NPAs to 3.97 per cent while net NPAs ruled at 0.74 per cent.

cj@thehindu.co.in

Federal Bank hikes interest rates on fixed deposits

MUMBAI: South-based Federal Bank today hiked interest rates on fixed deposits by up to 0.25 percent based on maturity.

Under the revised rates applicable from January 17, a deposit for above two years but less than three years will fetch an interest of 9.50 percent per annum as compared to the earlier 9.25 percent.

Similarly, a deposit for five years and above will earn the depositor a rate of 9.25 percent per annum, it said in a statement issued here.

Source: EconomicTimes

Punjab National Bank raises NRE deposit rates to 9.25 per cent

MUMBAI: The second largest public sector lender Punjab National Bank today increased the interest rates on NRE term deposits ranging one to five year period to 9.25 percent. The rates will be effective from January 1, the bank said in a filing to the BSE.

Last week, many other banks HDFC Bank, Yes Bank, Federal Bank, Allahabad Bank and Dhanlaxmi Bank among others had steeply increased the interest rates on select maturities of NRE deposits.

HDFC Bank increased the interest rates on NRE deposits of Rs one crore and above with a maturity of one to two year to nine percent against 3.82 percent earlier. It has, however, left the NRO deposit rates unchanged.

The state-run Allahabad Bank has also raised its NRE deposits up to 7.5 percent. The Kolkata-based bank will now offer 7.5 percent for one to two years tenor (against 3.82 percent earlier), 7 percent on deposits of two to three years (from 3.51 percent), and 6.75 percent for those above three years (from 3.64 percent).

Also, the Kochi-based Federal Bank and Laxmivilas Bank have also increased its interest rates on NRE deposits for various slabs in order to attract non-resident deposits. Another private sector lender IndusInd Bank also increased pricing 9.25 percent among the state-run banks Dena Bank offers the highest pricing at 9.6 percent. Similarly, Yes Bank came out with a 15 month-and-15 days to 16-month NRE deposit offer, promising depositors 9.60 percent interest.

Source: EconomicTimes

South Indian Bank, Federal Bank increase deposit rates

MUMBAI: Deregulation of interest rates on non resident term deposits has triggered an interest rate war among banks, with small banks like South Indian Bank and Federal Bank increasing deposit rates. Kerala headquartered Federal Bank on Monday hiked interest rates on one year non resident term deposit to 6.5% from 3.82%.

Thrissur based South Indian Bank also increased interest rates on non resident external term deposits across maturities to 6.75% from 3.82%. The revised interest rates will be applicable to fresh deposits and on renewal of deposits.

Their peers like IndusInd Bank, Dhanalaxmi Bank and Laxmi Vilas Bank could follow suit. The Reserve Bank of India on December 16 had deregulated interest rates offered on non resident external rupee and ordinary non resident deposits to attract flows.

The deregulation of interest rates has triggered the move. The hike in interest rates would be applicable for deposits opened for a period of one year only,'' said P C John executive director, Federal Bank. The hiked rate is applicable until the year end. Currently, the bank's non resident Indian deposit base stands at about Rs10,000 crore.

Interest rate on non resident external deposit is tax free and the interest is fully repatriable unlike the non resident ordinary account. This would encourage depositors to park excess funds in these accounts,'' said John.

The hike in interest rates analyst say would not have any impact on banks net interest margin and cost of funds. Banks currently offer about 9.75% interest on non resident ordinary accounts which is taxed and has limitations on repatriation unlike the non resident external account.

The deregulation will enable banks to substitute these high cost deposit with low cost deposits,'' said a banking analyst with a domestic brokerage.

We expect to maintain our net interest margin in the range of 3.7% to 3.75%,'' added John from Federal Bank.

Source: EconomicTimes

Federal Bank on recruitment drive

Kerala-based Federal Bank Ltd will recruit close to 1,500 probationary officers over the next one-two years to make good the retirements that are likely to take place and to create resource to meet its expansion targets.

Close to 1,000 employees of the bank are set to retire in the next two years, Mr Abraham Chacko, Executive Director, Federal Bank, said.

“The banking industry had witnessed massive recruitments during the post-nationalisation period. A majority of these employees are due for retirement over the next two-three years. This is a huge challenge for the industry,” Mr Chacko said at a banking event organised by the Calcutta Chamber of Commerce here on Wednesday.

Federal Bank has already recruited about 1,500 probationary officers over the last one-and-a-half years. Recruitments have to happen to create adequate resources and achieve the bank's ambitious growth target over the next few years, he pointed out.

Growth plans

“We are looking at scaling up our branch network from 825 at present to 1,000 by December 2012. We need manpower to man these branches,” Mr Chacko said.

Federal Bank aims to achieve 20 per cent growth in advances and deposits this fiscal. Large companies account for almost 40 per cent of the bank's total advances, while small and medium enterprises and retail account for about 28 per cent each.

The bank, which currently has one representative office in Abu Dhabi, has also applied for an offshore banking unit in Dubai. “We have applied to the RBI and we hope to receive its nod by early next year,” he said.

Federal Bank launches rewards scheme for debit card holders

Aluva-based Federal Bank has announced the launch of Utsav Rewards, an exclusive loyalty programme for the bank's debit card holders.

The scheme will provide the customers with points accumulated over transactions, and will assist them in redeeming the same for a wide range of consumer products.

Addressing a press conference here on Tuesday, Mr D. Sampath, Additional General Manager, Federal Bank, said that customers will get one Utsav point for every hundred rupees spent through their Federal Bank debit cards at point-of-sale terminals and e-commerce mode. Over 33 lakh customers will benefit from this scheme.

These points can be redeemed against two million merchandise items, which include electronic, entertainment, music, sports and family products, discount and gift vouchers as well as air/bus/movie tickets.

Customers are also likely to benefit by getting higher points or discounts for purchases made from certain brands as decided by the bank periodically, he said.

“We are pleased to be able to reward our customers with these benefits. We look forward to continue providing the best possible facilities to our customers and launching similar programmes as well,” Mr Sampath said.

Awareness campaign

He said that bank is planning a massive outdoor campaign for creating awareness among the customers on using debit cards for transactions. The usage of debit cards for merchandise transactions has been increasing in the country, and has overtaken credit-card usage.

The bank has a simple registration and redeeming process which can be accessed through its Web site. The Utsav points are valid for 36 months from the month of accrual, and the introductory offer comes with two Utsav points on every Rs 100 spent at Federal Bank PoS terminals.

Gold sales

Asked about the gold sales of the bank, Mr Sampath said the growth this year has been noteworthy. The bank could sell around 500 kg so far this year, against 260 kg last year. The sale of gold is likely to touch 600 kg by the end of this fiscal against the target of 800 kg, he added.

Others to follow SBI in raising deposit rates

The country's largest bank, State Bank of India (SBI), which recently launched an aggressive deposit mobilisation scheme that offered 8.5 per cent for tenures of seven days to 180 days, has caught the competition off its guard, and other banks are now considering launching similar products.

The new deposit scheme from SBI, launched earlier this week, would be applicable to deposits of more than Rs 1 crore. SBI has waived the pre-withdrawal penalty after seven days to make the product attractive.

Private sector lender Federal Bank followed suit today, launching a fixed deposit scheme for retail customers that offers 9.50 per cent on a maturity period of 200 days. For one year, the rate offered is 9.75 per cent.

According to a senior SBI official, the bank's new product would enable it to take advantage of the arbitrage opportunity, as rates offered for other short-term instruments, like certificates of deposits, are higher. SBI also expects the product, which has no pre-withdrawal penalty, to compete with resources flowing to liquidity mutual fund schemes which offer 8.5 per cent to 9.25 per cent.

SBI is keen to tap surplus funds of corporate houses, which are now parked in other banks, for a lower rate.

“There is a probability that banks would offer higher rates on deposits, given the current liquidity scenario,” said M Narendra, chairman and managing director, Indian Overseas Bank. The Chennai-based lender is also planning to raise rates for one-year maturity by 25 basis points to 9.5 per cent.

A senior Union Bank of India official said banks may decide on increasing the short-term rate over the next seven-10 days.

Liquidity has become tight over the last few days, with banks borrowing more than at least Rs 1 lakh crore, daily, on average, from RBI's liquidity adjustment facility. On Wednesday, banks borrowed Rs 1.35 lakh crore, compared with Rs 1.31 lakh crore on Tuesday from the RBI window. The liquidity tightness is well above the central bank's comfort zone of Rs 50,000 crore.

Source: Business Standard

Federal Bank plans to infuse Rs 120-cr equity in NBFC

Federal Bank is planning to infuse Rs 120-crore equity in its non-banking financial company, Fedbank Financial Services Ltd.

The NBFC is keen on expanding its gold loan portfolio by increasing its branch network to 300 by the end of the current financial year. It started its gold loan business in April and has opened 100 branches so far in Tamil Nadu, Karnataka and Andhra Pradesh. “We are now planning to go beyond South to Gujarat, Maharashtra and Goa,” said Mr Dilip Kumar Maloo, Vice-President and Head (Finance), Fedbank.

The company has already disbursed close to 45,000 loans, amounting to about Rs 350 crore, he said. According to him, the current average disbursement is Rs 3.1 lakh a day a branch, “which is growing at rapid speed every month”.

Announcing the launch of the company's new product Fast Gold Loan, at a press conference here today, Mr P.K. Mohapatra, Deputy General Manger and Acting Head of the company, said the overall gold loan portfolio in the organised market is in the region of Rs 40,000 crore. More than 70 per cent of this is from the South, and it is growing at 35-40 per cent, he said. 

rravikumar@thehindu.co.in

Federal Bank signs pact with Tata Motors for vehicle financing

Federal Bank on Monday said it has signed an agreement with the auto major Tata Motors to finance the latter’s commercial vehicles through an alliance partnership.

The partnership can be termed as a strategic alliance between one of the major private sector banks, having 823 branches and the biggest vehicle manufacturer, having over 60 per cent market share in commercial vehicle segment of our country, Federal Bank said in a statement.

“We see vast opportunities in servicing our SME customers through this relationship,” said Mr P.C. John, Executive Director, Federal Bank.

Federal Bank, LIC tie up for e-transfer of maturity proceeds

Kochi, Nov. 17: Federal Bank has signed an agreement with Life Insurance Corporation of India for paying maturity proceeds of LIC policies.

Hitherto the maturity proceeds were paid by cheques from the respective branch offices of LIC across the country and sent to the beneficiaries one month prior to the due date. Now the proceeds will be credited directly to the beneficiary's account by way of NEFT (National Electronic Funds Transfer) on the due date. This move will be cost effective for LIC and improve the payment system.

Clients need not wait for the cheque to get cleared as the payment is credited directly into the account. Problems such as cheques getting lost in transit, fraudulent encashment, and so on, will not arise.

Federal Bank is among the few banks which have signed agreements with LIC as the bank has systems in place to ensure that NEFT payments from each Divisional Office, numbering to more than 10,000 daily, can be sent smoothly.

Mr Antu Joseph, Deputy General Manager, Federal Bank, said that the alliance will create a win-win situation for all parties involved, giving the customers a hassle-free and convenient claims option.

According to Mr V. K. Kukreja, Executive Director, Finance and Accounts, LIC, “We are excited about the potential of our tie-up with Federal Bank, which is one of the leading banks with a strong focus on asset quality, excellence in banking technology and delivery of service quality.”

New licences don't scare Federal Bank

"It may be three years away from when new bank licences get operationalised and build up some scale, but we are not just going to stay quiet and watch," says Mr Shyam Srinivasan, Managing Director and Chief Executive Officer, Federal Bank.

"We have our own aspiration plans to scale-up, he told Business Line here. Three years from now, Federal Bank will have 1,500 branches. It will be a formidable size," he added.

But he would not sit and worry whether new banks would hurt because they have a lot of catching-up to do. But he anticipates what he described as 'a huge raid' on the bank's employees.

"By that time, our young team would be four years into the job, trained and invested by us. The challenge of a hostile raid on the human resources is bound to happen in any competitive environment. "Yes, that is a huge challenge, but I will not brood over it and get alarmed yet," Mr Srinivasan said.

High savings deposit rate likely to dent banks' profits

Fears of banks’ earnings plummeting in a deregulated savings deposit rate regime appear to have gripped investors, with most analysts hinting that profitability may come under pressure due to higher cost of funds amid slowing growth in advances.

“The rise in the savings deposit rate will increase pressures on banks’ profitability,” Suman Chowdhury, head of Crisil Ratings, said.

The rating agency expects the lenders’ return on asset ratio to shrink by five basis points (bps) because of higher savings deposit rate, even if banks increase their transaction and service charges on such deposits.

The Reserve Bank of India yesterday allowed banks to decide on their own the interest rate on savings deposits. The central bank, however, asked banks to pay a uniform rate on savings deposits up to Rs 100,000 irrespective of the amount in the account.

Lenders may offer differential rates on deposits above Rs 100,000, but there should not be any discrimination between customers on interest rates for similar deposit amounts. Banks have been paying four per cent interest on savings deposits.

The move was not well received by investors, as bank shares plunged yesterday in an otherwise strong broader market. The 12-share Bank Nifty closed 1.41 per cent down, though the benchmark 50-share S&P CNX Nifty ended 1.83 per cent higher.

“We think this is a positive move for the economy, even though it is a negative for banks, as it will increase their funding costs,” Tushar Poddar and Prakriti Shukla, economists with Goldman Sachs, said in a note.

Economists and analysts fear in the short term, the deregulation may lead to a rate war, with small and medium-sized banks looking to strengthen their retail deposit bases will hike their savings deposit rates aggressively.

It took no time for YES Bank, the youngest lender in the country, to increase its savings deposit rate by 200 bps to six per cent. The private lender’s share of low-cost deposit was only 11 per cent at the end of September.

Other lenders such as IDBI Bank, Canara Bank, Bank of India, Federal Bank and Union Bank of India that have relatively lower share of the savings deposit base, are expected to raise rates soon.

“This change (deregulation of the savings deposit rate) is likely to result in an upward pressure on the deposit and interest rate trajectory in the near term, given the ongoing tightness in liquidity,” Siddhartha Sanyal, chief economist of Barclays Capital in India, said.

Industry experts said some bank stocks that were enjoying a premium over their peers because of strong retail deposit base, may be re-rated.

SMC Global Securities estimates if the savings deposit rate rises by 100 bps, banks profitability could be reduced by 12.9 per cent. “In the short term, it can be said the deregulation of interest rates on savings accounts is a real game-changer,” Jagannadham Thunuguntla, strategist and head of research at SMC, said.

Source: Business Standard

Federal Bank Q2 profit up 36% on strong interest income

Kochi, Oct. 24:The net profit of Federal Bank has risen by 36 per cent to Rs 191.16 crore (Rs 140.40 crore) during the second quarter of 2011-12. The bank has delivered substantial growth in its top-line and bottom-line despite a challenging macroeconomic environment, the bank said.

The growth in profit was mainly supported by a spurt in interest income, which grew by close to 40 per cent to Rs 1,368 crore. The bank has become the most profitable from Kerala, among its peers in both the public and private space, a press release issued here has said.

‘Other income' down

While there was a spurt in interest income, ‘other income' declined by close to 19 per cent to Rs 117 crore. However, the handsome growth in interest-based income enabled the total income to grow by 32 per cent to Rs 1,485 crore.

This was supported by net interest margin which stood at 3.77 per cent for the quarter. Low-cost deposits, comprising CASA and NRE deposits, grew by 15 per cent to Rs 14,794 crore.

The total business of the bank grew by 27 per cent to Rs 80,870 crore. Reflecting the macroeconomic challenges, deposits grew at a faster pace than deposits. Deposits rose by 31 per cent to Rs 36,116 crore while advances grew at 22 per cent to Rs 33,607 crore. The growth was mainly contributed by advances to the SME and retail sectors, which grew by 29 per cent and 28 per cent, respectively.

Lower NPA

While the bank could reduce the gross NPAs (non-performing assets) to 3.61 per cent, the net NPAs declined to 0.58 per cent at the end-September 2011. Despite the good profit numbers, the bank was able to increase the provisions held against NPAs to 82.97 per cent.

While the net worth of the bank has increased to Rs 5,446 crore, the capital adequacy ratio, as computed by the Basel II guidelines, stood at 15.05 per cent.

The Tier-I core capital was at 14.03 per cent. Taking Vision 2015 as the cornerstone for all its policy actions, the bank has created a ‘Corporate Social Responsibility' cell.

Federal Bank opens 66 new branches

KOCHI Alwaye-based Federal Bank has announced the opening of 66 new branches on Tuesday. Speaking to ET, CEO and MD Shyam Srinivasan, Federal Bank explained that the way forward for Federal Bank was to scale up on its strength in new territories. Of the new branches, 12 are in Gujarat, 10 in Karnataka, nine in Tamil Nadu and six in Maharashtra.

Source: EconomicTimes

Federal Bank rolls out 66 branches, 34 ATMs

On the occasion of its Founders Day celebrations on Tuesday and to mark its 66{+t}{+h} year of operations, Kerala-based Federal Bank has launched 100 new customer touch points in the country — 66 branches and 34 ATMs.

Speaking on the occasion, Mr Shyam Srinivasan, Managing Director and CEO, said that of these 66 branches, 28 are in Kerala and 38 distributed across the country, giving the bank an enhanced presence in Tamil Nadu, Gujarat and Karnataka. With this, the bank is now present in 25 States and has touched 100 branches in the Mumbai zone, he said.

Besides the launch of new touch points, he said the bank marked its Founders Day with the launch of many inaugural offers such as special pricing for deposits of 66 days tenor, specialised offerings on gold loans, home loans and bullion.

The bank at present has a network of 823 branches, including the 66 new branches, and business worth Rs 81,000 crore giving it the leading position amongst the private sector banks.

The bank aims to become a dominant player in the Indian banking sector and the No. 1 player in its home State in the near future, in addition to establishing a significant presence in other select States and segments, he added.

At a time when most banks in India are cautious in lending to SMEs fearing deterioration in credit quality, he said that the bank is focussing on this segment with caution and confidence.

This move is in line with its vision of becoming the most trusted partner for the SME, retail and NRI customer segments.

The bank also has a programme to develop its human resources, so that they provide best-in-class service to its customers and support its scale-up of operations, he said.