Conference Call with Federal Bank Management and Analysts on Q4FY20 and Full Year Earnings Performance and Outlook. Listen to the full earnings transcript.
Opening remarks from Shyam Srinivasan
Thank you and good afternoon everybody.
I am just trying to reflect back on 26th February, when we had our analyst day in Mumbai and we came away quite encouraged that we had given a good narration of ourselves and many of you are on the call today and had a good sense of our plans and the way forward while our direction has been changed. Certainly the challenges that we have faced today, we had not visualized then and consequently the mid-course corrections have been quite daunting.
That said, I believe that Q4 given all the challenges was fairly strong operationally. We had some gains, some challenges. Whatever gains we got, we made sure that it helped to strengthen the balance sheet and position the bank for whatever challenges or environmental issues that may crop are that we have faced with. A quick two line update on the Covid-19 impact on the bank - no different from any other organization in the country. We had distinct sorts of issues in terms of people having to work from home. Quite happily and interestingly, we arranged ourselves in such a way that it looks like today our lives have got to work from home. In particular, our teams in Mumbai and other large metros have had to literally do everything from far. Even the Q4 results including our auditors, board members, everybody from multiple locations made it a seamless process.
In terms of our business situation, in terms of the momentum, our belief is that Q4 in particular till about 10th of March, first week of March, we were coursing quite well in all the areas we have sort of chosen to put our attention around where our growth was containment of cost. As also, most importantly and crucially we mapped improvements in credit quality and the recovervies. Unfortunately the last 3-4 weeks had challenges that did dent on our numbers. We made sure that we can substantially increase our provision cover and enhance our coverage ratios and strengthen the balance sheet in a manner that we hadn’t done before so that sort of positions us very strongly as we enter what arguably is one of the toughest times in any of our lives.
We just know that 35% of our book is in moratorium and we have diced it in many ways. We have a sense of how we can deal with it but the outcomes are not necessarily predictable. But I think we are positioning ourselves well to make sure we can deal with all the challenges that are likely to come up. In terms of numbers, I am not getting into any of them. I think you all had an opportunity to look at our update. Operating profit was clearly the highest all time ever at Rs 959 crores. The Gross and Net NPA both had a material improvement which I think is a tribute to our multi-year focus on being conservative in credit standard and ensuring that the quality of the book is quite robust.
We had a good quality liability franchise and all of it is granular. Many of you have been reporting that we are the top 2-3 banks in terms of the richness of the liability franchise that is continuing even through the first two months of this financial year. We have seen good quality growth and I believe that it will continue. Our focus around digital enhanced during the Covid even more. Our digital transaction volume has picked up both for individuals and for corporates. On balance, credit growth for the year was at 11%, deposit growth was for 13%. Both of them are marked by the last 2-3 weeks slowdown otherwise it could have fit the mid-teams.
We have consciously for four quarters been slowing down the mid and higher ticket rates and that's visible in the business. We saw some pick up towards the second half of the financial year. Other income, in particular treasury, had a very strong year. We have made substantial provisions for wage increase on account of the negotiations that are going on. Let me summarize by saying that we exited Q4 operationally strong, well provided for. Whatever opportunities we got, we set that aside and ensured that we strengthened the book. We are preparing to make sure that in Q1 and Q2 of this year which is likely to be lower, no provisions in a normal sense because of the moratorium and the consequence of it we will substantially build up provisioning to make sure that we are well positioned and our capital adequacy continues to be strong at 14.3%.