The Federal Bank Ltd.

Earnings Release • Jul 17, 2018

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RNS Number : 9189U

Federal Bank Ltd (The)

17 July 2018

SDF-24/         /2018-19                                                                      17th July 2018

To,

The London Stock Exchange

Dear Sir,

We enclose herewith the UnAudited Financial Results of the Bank for the period ended June 30, 2018 which was approved at the Bank's Board of Directors meeting held on 17th July 2018.

Kindly take the same on your record.

For The Federal Bank Limited

Girish Kumar G

Company Secretary

B S R & Co. LLP	M.M. Nissim & Co.
Chartered Accountants	Chartered Accountants
5th Floor, Lodha Excelus	Barodawala Mansion, B-Wing,
Apollo Mills Compound	3rd Floor, 81,
N.M. Joshi Marg, Mahalaxmi	Dr. Annie Besant Road,
Mumbai- 400 011	Worli, Mumbai- 400 018

Limited Review Report on Unaudited Quarterly Standalone Financial Results of The Federal Bank Limited pursuant to the Regulation 33 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015

To the Board of Directors of

The Federal Bank Limited

1.   We have reviewed the accompanying Statement of Unaudited Standalone Financial Results ('the Statement') of The Federal Bank Limited ('the Bank') for the quarter  ended 30 June 2018, attached herewith, being submitted by the Bank pursuant to the requirement of Regulation 33 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 ('Listing Regulations'), except for the disclosures relating to consolidated Pillar 3 disclosure as at 30 June 2018, including leverage ratio and liquidity coverage ratio under Basel III Capital Regulations as have been disclosed on the Bank's website and in respect of which a link has been provided in the Statement and have not been reviewed by us. Attention is drawn to the fact that the figures for the 3 months ended 31 March 2018 as reported in these financial results are the balancing figures between audited figures in respect of the full previous financial year and the published year to date figures up to the third quarter of the previous financial year. The figures up to the end of the third quarter of previous financial year had only been reviewed and not subjected to audit.

2.   This Statement is the responsibility of the Bank's management and has been approved by the Board of Directors of the Bank in their meeting held on 17 July 2018. Our responsibility is to issue a report on the Statement based on our review.

3.   We conducted our review in accordance with the Standard on Review Engagement (SRE) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Institute of Chartered Accountants of India.  This standard requires that we plan and perform the review to obtain moderate assurance as to whether the Statement is free of material misstatement.  A review is limited primarily to inquiries of the Bank's personnel and analytical procedures applied to financial data and thus provides less assurance than an audit.  We have not performed an audit and accordingly, we do not express an audit opinion.

4.   The Financial results incorporate the relevant returns of 113 Branches and Treasury Branch reviewed by either of us and un-reviewed returns in respect of 1,139 branches. These Branches cover 60.80% of the advances portfolio (excluding outstanding of asset recovery branches and food credit advance) of the Bank and 50.79% of non-performing advances of the bank.

5.   Without qualifying our conclusion, we draw attention to Note No. 9 regarding exercise of the option by the Bank by spreading the provision for Mark to Market (MTM) losses over four quarters resulting into carrying forward of un-amortised MTM losses of ₹ 4,420.48 Lakhs as at 30 June 2018 for amortisation in remaining quarters.

6.   Based on our review conducted as mentioned in paragraphs 3 and 4 above, nothing has come to our attention that causes us to believe that the accompanying Statement prepared in accordance with applicable accounting standards specified under Section 133 of the Companies Act, 2013, read with Rule 7 of the Companies (Accounts) Rules, 2014 and other recognized accounting practices and policies has not disclosed the information required to be disclosed in terms of Regulation 33 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, including the manner in which it is to be disclosed, or that it contains any material misstatement or that it has not been prepared in accordance with the relevant prudential norms issued by the Reserve Bank of India in respect of income recognition, asset classification, provisioning and other related matters.

For B S R & Co. LLP	For M.M. Nissim & Co.
Chartered Accountants	Chartered Accountants
Firm's Registration No: 101248W / W-100022	Firm's Registration No: 107122W
Akeel Master	Sanjay Khemani
Partner	Partner
Membership No: 046768	Membership No: 044577
Mumbai	Mumbai
17 July 2018	17 July 2018

THE FEDERAL BANK LIMITED

REGD.OFFICE: P.B.NO. 103, FEDERAL TOWERS, ALUVA-683101

(CIN: L65191KL1931PLC000368)

STANDALONE UNAUDITED FINANCIAL RESULTS FOR THE QUARTER ENDED JUNE 30, 2018

(` in Lakhs)

Particulars

Quarter ended

30.06.2018

31.03.2018

30.06.2017

31.03.2018

Unaudited

Audited

(Refer Note 12 below)

Unaudited

Audited

1. Interest earned (a)+(b)+(c)+(d)

266,738

254,797

232,409

975,286

(a)

Interest/discount on advances/bills

207,944

195,106

178,775

753,878

(b)

Income on investments

50,715

51,695

46,829

191,744

(c)

Interest on balances with Reserve Bank of India and other inter bank funds

2,523

1,840

2,367

9,581

(d)

Others

5,556

6,156

4,438

20,083

2. Other income

27,086

31,417

32,910

115,912

3. TOTAL INCOME (1+2)

293,824

286,214

265,319

1,091,198

4. Interest expended

168,732

161,475

152,342

617,005

5. Operating expenses (i)+(ii)

64,800

65,882

57,192

245,090

(i)

Employees cost

34,502

33,081

29,845

124,247

(ii)

Other operating expenses

30,298

32,801

27,347

120,843

6. TOTAL EXPENDITURE (4+5)

(excluding provisions and contingencies)

233,532

227,357

209,534

862,095

7. OPERATING PROFIT (3-6)

(Profit before provisions and contingencies)

60,292

58,857

55,785

229,103

8. Provisions (other than tax) and contingencies

19,915

37,153

23,644

94,717

9. Exceptional items

-  

-  

-  

-  

10. Profit from Ordinary Activities before tax

(7-8-9)

40,377

21,704

32,141

134,386

11. Tax expense

14,106

7,205

11,126

46,501

12. Net Profit from Ordinary Activities after tax  (10-11)

26,271

14,499

21,015

87,885

13. Extraordinary items (net of tax expense)

-  

-  

-  

-  

14. Net Profit for the period (12-13)

26,271

14,499

21,015

87,885

15. Paid-up Equity Share Capital

(Face value ` 2/- per Equity Share)

39,552

39,443

38,846

39,443

16. Reserves excluding Revaluation Reserve

1,181,080

17. Analytical Ratios

(i)

Percentage of shares held by Government of India

NIL

NIL

NIL

NIL

(ii)

Capital Adequacy ratio (%)

Under Basel III

14.50

14.70

15.28

14.70

(iii)

Earnings per Share (EPS) (in `)

(a) Basic EPS  (before and after extra ordinary items)

1.33*

0.74*

1.21*

4.62

(b) Diluted EPS (before and after extra ordinary items)

1.32*

0.73*

1.19*

4.56

(iv)

NPA Ratios

a) Gross NPA

286,882

279,562

186,794

279,562

b) Net NPA

162,022

155,196

106,126

155,196

c) % of Gross NPA

3.00

3.00

2.42

3.00

d) % of Net NPA

1.72

1.69

1.39

1.69

(v)

Return on Assets (%)

0.20*

0.11 *

0.19 *

0.75

* Not Annualised

Segment Information@
						(` in Lakhs)
Particulars		Quarter ended
30.06.2018	31.03.2018		30.06.2017	31.03.2018
Unaudited	Audited (Refer Note 12 below)		Unaudited	Audited
Segment Revenue:
	Treasury	62,296	60,888		63,776	239,556
	Corporate/Wholesale Banking	112,799	103,194		90,641	378,695
	Retail Banking	114,264	116,178		106,978	454,386
	Other Banking operations	4,465	5,954		3,924	18,561
	Unallocated	-	-		-	-
	Total Revenue	293,824	286,214		265,319	1,091,198
	Less: Inter Segment Revenue	-	-		-	-
	Income from Operations	293,824	286,214		265,319	1,091,198
Segment Results (net of provisions):
	Treasury	9,796	(3,063)		12,740	25,650
	Corporate/Wholesale Banking	1,914	(18,875)		(1,822)	(13,797)
	Retail Banking	28,323	41,735		20,825	120,093
	Other Banking operations	750	2,822		890	5,251
	Unallocated	(406)	(915)		(492)	(2,811)
	Profit before tax	40,377	21,704		32,141	134,386
Segment Assets
	Treasury	3,145,414	3,510,841		2,971,047	3,510,841
	Corporate/Wholesale Banking	5,249,962	5,072,766		3,979,638	5,072,766
	Retail Banking	4,593,053	4,539,627		4,040,982	4,539,627
	Other Banking operations	1,184	533		3,000	533
	Unallocated	678,484	707,628		648,897	707,628
	Total	13,668,097	13,831,395		11,643,564	13,831,395
Segment Liabilities
	Treasury	2,981,393	3,348,514		2,778,773	3,348,514
	Corporate/Wholesale Banking	5,005,327	4,849,217		3,792,853	4,849,217
	Retail Banking	4,380,781	4,341,585		3,848,458	4,341,585
	Other Banking operations	4	1		-	1
	Unallocated	50,716	71,055		60,699	71,055
	Total	12,418,221	12,610,372		10,480,783	12,610,372
Capital employed:
(Segment Assets - Segment Liabilities)
	Treasury	164,021	162,327		192,274	162,327
	Corporate/Wholesale Banking	244,635	223,549		186,785	223,549
	Retail Banking	212,272	198,042		192,524	198,042
	Other Banking operations	1,180	532		3,000	532
	Unallocated	627,768	636,573		588,198	636,573
	Total	1,249,876	1,221,023		1,162,781	1,221,023
@	For the above segment reporting, the reportable segments are identified into Treasury, Corporate/Wholesale Banking, Retail Banking and Other Banking Operations in compliance with the  RBI guidelines.
Notes:
1	The above Standalone Unaudited Financial Results for the quarter ended June 30, 2018 were reviewed by the Audit Committee and approved by the Board of Directors at its meeting held on July 17, 2018. These Results have been subjected to "Limited review" by the Statutory Central Auditors of the Bank and an unqualified review report has been issued.
2	The Bank has made provision for Non Performing Assets as stipulated under Reserve Bank of India (RBI) norms. Further, provision for standard assets including requirements for exposures to entities with Unhedged Foreign Currency Exposures and provision for restructured advances have been made as per RBI guidelines.
3	The Bank has followed the same significant accounting policies in the preparation of the interim financial results as those followed in the annual financial statements for the year ended March 31, 2018.
4	In accordance with RBI Circular  DBR.No.BP.BC.1/21.06.201/2015-16 on Basel III Capital Regulations dated July 01, 2015 and RBI Circular DBR.No.BP.BC.80/21.06.201/2014-15 dated March 31, 2015  - 'Prudential Guidelines on Capital Adequacy and Liquidity Standards - amendments', Banks are required to make Pillar 3 disclosure requirements including Leverage Ratio disclosure requirements that are to be made along with the publication of Financial Results. Accordingly, such applicable disclosures have been placed on the website of the Bank which can be accessed at the following link: http://www.federalbank.co.in/regulatory-disclosures. These disclosures have not been subjected to audit or review by the Statutory Central Auditors of the Bank.
5	The Business operations of the Bank are largely concentrated in India and for the purpose of Segmental reporting, the bank is considered to operate only in domestic segment, though the bank has its operations in International Finance Service Centre (IFSC) Banking Unit in Gujarat International Finance Tec-city (GIFT). The business conducted from the same is considered as a part of Indian operations.
6	Other income includes fees earned from providing services to customers, commission from non-fund based banking activities, earnings from foreign exchange and derivative transactions, selling of third party products, profit on sale of investments (net), recoveries from advances written off etc.
7	During the quarter ended June 30, 2017 , the Bank had issued 215,517,241 equity shares of ` 2 each for cash pursuant to a Qualified Institution Placement (QIP) as per the relevant provisions of SEBI (Listing Obligations and Disclosure Requirements) Regulations at ` 116.00 per share aggregating to ` 250,000 Lakhs (including share premium). This resulted in an increase of ` 4,310.35 Lakhs in Share Capital and ` 242,077.64 Lakhs (net of issue expenses) in Share premium account.
8	During the quarter ended June 30, 2018, the Bank has allotted 5,480,555 equity shares of ` 2 each, pursuant to the exercise of stock options by employees.
9	On marking to market its investments as at June 30, 2018 in Government Securities held under Available for Sale and Held for Trading category, the Bank has incurred net depreciation of ` 5,893.97 Lakhs.  As permitted vide RBI Circular DBR.No.BP.BC.113 /21.04.048/2017-18 dated June 15, 2018, the Bank has exercised the option of spreading the provision for such Marked to Market (MTM) losses equally over four quarters commencing from current quarter. Accordingly, during the quarter ended June 30, 2018, ` 1,473.49 Lakhs has been charged to the profit and loss account towards such MTM losses and the balance unamortised MTM Loss of ₹ 4,420.48 Lakhs has been carried forward, which shall be amortised in remaining quarters.
10	Ministry of Labour and Employment, Government of India on March 29, 2018 has enhanced the gratuity ceiling to an employee under Payment of Gratuity Act, 1972 to ` 20 Lakhs from earlier limit of ` 10 lakhs. This change has resulted  to an incremental gratuity liability amounting to ` 7,143.90 lakhs. As per the RBI circular DBR.BP.9730/21.04.018/2017-18 dated April 27, 2018 the Bank has an option to spread the impact of change in gratuity ceiling over four quarters beginning with the quarter ended March 31, 2018. The Bank had availed the option to spread the incremental gratuity expenditure over four quarters beginning with the quarter ended March 31, 2018. Accordingly, during the quarter ended March 31, 2018 the Bank has charged to the profit and loss account an amount of ` 1,785.97 Lakhs and there was an unamortised gratuity expenditure of ₹ 5,357.93 Lakhs. Based on the correspondence with the Reserve Bank of India (RBI) during the quarter ended June 30, 2018, the Bank has charged to the profit and loss account the entire unamortised gratuity expenditure of ₹ 5,357.93 Lakhs.
11	Pursuant to Board approved policy on preparation of segment information, the Bank, with effect from quarter ended September 30, 2017, has revised the basis of preparation of segment information related to the allocation of RIDF deposits from Treasury segment to Corporate/Wholesale Banking and Retail Banking segments and allocation of provision related to advances on a direct identification basis for more appropriate presentation of the segment results. Figures for the previous periods have been regrouped / reclassified to conform to current period's classification. The impact of above regrouping / reclassification on segment results for the quarter ended June 30, 2017, is summarized in the table below:
		(` in Lakhs)
	(Decrease) / Increase	Standalone
	Quarter ended
	30.06.2017
	Treasury	(91)
	Corporate/Wholesale Banking	(4,818)
	Retail Banking	4,171
	Other Banking operations	738
	Unallocated	-
	The above regrouping / reclassification has no impact on the overall profit of the bank for the quarter ended June 30, 2018 or the previous periods/year.
12	The figures of the quarter ended March 31, 2018 are the balancing figures between the audited figures in respect of the full Financial Year upto March 31, 2018 and the unaudited published year to date figures upto December 31, 2017 being the date of the end of the third quarter of the financial year, which were subjected to Limited Review.
13	Previous period's / year's figures have been regrouped / reclassified, where necessary to conform to current period's classification.
					SHYAM SRINIVASAN
Mumbai					MANAGING DIRECTOR & CEO
July 17, 2018					(DIN: 02274773)

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