Assignment on the Financial Analysis

of

By : Utkarsh Sharma
Batch : 4 C
Roll No. : K04113
Submitted to: Prof. John Thomas
Profit & Loss Account:

Profitability:
The Operating Profit of the Bank has increased by 35.20% to Rs.1924.93 Cr and Net Profit has
increased by 74.66% to Rs.830.79 Cr.
Healthy increase in core income streams, improved asset quality has helped the bank to have a
sharp rise in profitability.
 Net Interest Income improved by 21.73% to Rs.3052.65 Crore while the Non-Interest Income
rose to Rs.1081.81 Crore, showing a rise of 33.85%.
Total income of the Bank during the fiscal year 2017 has recorded a 14.06 % growth to reach
Rs.9759.20 Crore. Income from advances increased by 15.46% to reach Rs.6545.68 Crore.
The yield on advances stood at 10.43% and the yield on Investments at 8.13 %.
Return on Average Equity and Return on Average Total Assets stood at 9.89 % and 0.84%
respectively. Earnings per Share (face value of Rs.2 each) of the Bank, as on 31 March 2017 was
Rs.4.83. Book value per share had increased to Rs.51.37 during FY 17.

Expenditure:
Higher revenue growth and better cost management resulted in an improved Cost / Income
Ratio which increased to 53.44% in 2016-17 as against 57.06% in the previous year.
The total expenses of the bank increased by 9.84% which reached at Rs.7834.27 Cr and by an
increase of 7.33%, interest expenses increased to Rs.5624.74 Cr in FY 17.
Operating Expenses of the Bank during the fiscal year grew to Rs.2209.53 Cr. The cost of
deposits of the Bank has come down during the year. The cost of deposits of the Bank is 6.25%
as on 31 March 2017. The Interest expenses as percentage to total income stood at 57.64%.

Spread:
During the fiscal year the Bank's spread on advances increased to 4.18% and spread on
investments stood at 1.88%.
The Spread on advance improved to3.53% in comparison to 3.02% of the previous year.

Asset Quality:
The Gross NPA of the Bank as on 31st March 2017 stood at Rs.1727.05 Cr. Gross NPA as a
percentage to Gross Advances is 2.33% which is lower than 2.84% as at the end of FY16.
The Net NPA stood at Rs.941.20 Cr and this as a percentage to Net Advances is 1.28%. This NPA
figure of 1.28 % represents a remarkable achievement at keeping the NPAs low when compared
to an industry average of 7.6%.

Net worth & Capital Adequacy:

The Net Worth of the Bank grew by 11.42% to Rs.8856.47 Cr as against Rs.7948.96 Cr in the
previous year. Historically, the Bank has been strong on capital adequacy.
 CRAR (Capital to Risk Assets Ratio) of the Bank calculated in line with Basel III norms stood at
12.39% which is considerably higher than the 9% stipulated by RBI. Of this, Tier 1 CRAR is at
11.81%.

CSR Expenditure:
The amount to be spent by the Bank towards CSR for FY 2016-17 as per Section 135 of the
Companies Act, 2013, comes to Rs 23.01 Crores. Amount spent by the Bank this year towards
CSR was Rs 15.42 Crores. Through various projects which are already sanctioned, the Bank will
be thoughtfully spending the CSR funds earmarked for the purpose.
The ratio adopted was 80:20, wherein 80 % of the CSR funds will be utilized for long term
sustainable projects and 20 % of the funds will be utilized to meet location specific requests. The
Bank had also embarked on some major projects last year in the field of education, Youth
engagement, skill development, support to differently abled etc. By choosing long term
sustainable projects, Bank has taken an approach which brings steady and long lasting impact on
society.

Subsidiary of the Bank:

As on 31 March 2017, the Bank has one unlisted fully-owned subsidiary named Fedbank
Financial Services Limited. Fedbank Financial Services Limited is a diversified Non-Deposit-Taking
& Systemically Important (ND-SI) NBFC offering multiple loan products such as Loan against
Property (LAP), Structured Finance and Loan against pledge of Gold ornaments. It also
distributes loan products of The Federal Bank Limited The total loan portfolio of Fedbank
Financial Services Limited as on 31 March 2017 is Rs. 962 Crores as against Rs. 611 Crores as on
31 March 2016. The Profit After Tax of the company for the year ended 31 March 2017
increased to Rs 22.53 Crores from Rs 12.25 Crores for the year ended 31 March 2016.
Balance Sheet :

INTERPRETATION & ANALYSIS:-

Growth in Business:
During the year 2016-17, Federal Bank has tried to bring in substantial and all-round
improvement in various financial parameters. Total business of the Bank has improved by
24.58% to reach at Rs.171000.84 Crore as on 31 March 2017.
23.36% growth in deposits and 26.25% growth in advances aided the federal bank to reach this
number. Total deposits amounted to Rs.97664.57 Crore and advances reached Rs.73336.28
Crore and on an average, deposit portfolio of the bank grew by 18.71% to reach Rs.86502.75
Crore which is very good indicator for the future growth of the Bank.
 Savings deposit reached Rs.26397.67 Crore with 23.23% growth and Current deposits stood at
Rs.5439.96 Crore with a growth of 27.02%. Federal bank has registered a healthy CASA (Current
Account and Savings Account) growth of 23.86% to reach Rs.31837.63 Crore.
The investment portfolio of Federal Bank has reached Rs.28196.09 Crore as on 31 March 2017.
The average investment as on 31 March 2017 is Rs.25948.30 Crore. This signifies

Increase of Capital:
In FY 2016-17,the Paid Up Capital of the Bank was increased by an amount of Rs1,01,97,140 by
allotment of 50,98,570 ESOS shares of Rs. 2/- each. The Paid up Capital of the Bank as on 31 March
2017 is Rs.344,80,90,828 consisting of 172,40,45,414 equity shares of Rs. 2/- each.

Dividend Distribution:
The Board of Directors have recommended a dividend of 45% i.e. Rs.0.90/- per Equity Share on face
value of Rs. 2/- each for the year 2016-17 (previous year 35% i.e Rs. 0.70/- per Equity Share) subject to
the approval of the members at the ensuing Annual General Meeting. In terms of revised Accounting
Standard (AS) 4 "Contingencies and Events occurring after the Balance sheet date" as notified by the
Ministry of Corporate affairs through amendments to Companies (Accounting Standards) Amendment
Rules, 2016, the Bank has not appropriated proposed dividend (including tax) aggregating to
RsRs.18,675 Lakhs from the statement of Profit and loss account for the year ended March 31, 2017.
However the effect of the proposed dividend has been reckoned in determining capital funds in the
computation of Capital adequacy ratio as on March 31, 2017.

General Business Overview:

The Bank continued its consistent performance during FY 2016-17 with the total Business of the
Bank increasing by 24.58% to Rs.171000.84 Cr.
There is no change in the nature of business of the Bank for the year under review. Further
information on the business overview and outlook and state of the affairs of the Bank is
discussed in detail in the Management Discussion & Analysis.
Cash flow statement of Federal Bank

There has been a net increase of Rs.20314983 ( In Thousands) i.e increase of 27.25 % which indicates a
substantial increase in liquidity of the bank.
The above Table indicates the Total Indebtedness of the bank which is Rs.2060.91 Crore , it is comprised
of both Secured and Unsecured loans. The Unsecured loans comprises of 1247.71 Crore i.e. 60.6 % of
the Total Indebtedness which is not a good indicator.

Ratio Analysis :
Analysis of Bankss Business Performance:
The announcement of demonetization which gave a big jolt to the Indian economy saw the banking
sector become the beneficiary with access to huge deposits. A high and rising proportion of banks
stressed loans, particularly those of public sector banks (PSBs) and a consequent increase in provisioning
for non-performing assets 51 Annual Report 2016-17 (NPAs) continue to weigh on credit growth
reflecting their lower risk appetite and stressed financial position.

The Banks CASA has shown sustained growth along with its deposit portfolio. 94.08% of the Deposit
book is non-bulk and granular in nature. The Net Worth of the Bank increased to Rs 8856.47 Cr as on
31.3.2017.

The Capital Adequacy Ratio (CRAR) of the Bank, computed as per Basel III guidelines, stands at a very
comfortable level of 12.39 % as on 31.3.2017. The Bank has posted a net profit of Rs 830.79 Cr for the
year ended March 31, 2017.

Total income for the year grew by 14.06% to Rs 9759 Cr and Other Income stood at Rs1081.81 Cr. Net
Interest Margin (NIM) of the Bank stood at 3.31%.

The total deposits of the Bank increased by 23.36 % to Rs. 97,664.57 Cr and Net advances of the Bank
stood at Rs. 73336.28 Cr. CASA of your Bank increased by 23.86% from Rs. 25704.84 Cr to Rs. 31837.63
Cr.

Gross NPA stood at Rs 1727.05 Cr and Net NPA stood at Rs 941.20 Cr as on 31.03.2017. Gross NPA as
percentage to Gross Advances was 2.33% and Net NPAs as a percentage to Net Advance was 1.28%,
both of which were lower than FY 16. PCR (Provision Coverage Ratio) including written off assets stood
at 71.75%.
In the advance front, Retail advances recorded a growth of 27.08% to Rs 21793.62 Cr from 17149 Cr,
SME grown from Rs 15000 Cr to Rs 17641.13 Cr showing a growth of 17.61% and the corporate book
grew from 20338 Cr to 27159 Cr recording a growth of 34%. Return on Average Assets stood at 0.84%
and return on Equity of the Bank is 9.89% now.

Corporate and Institutional Banking:

During the FY 17 this business grew strongly by 33.54% to Rs 27,159 Cr against Rs 20,338 Cr in FY-16.
The bank was able to add some new prestigious clients to the portfolio using innovative product
offerings with quick turnaround time. To ensure adequate significance for this segment, the Banks focus
remain on in-depth understanding of borrowers, widening the ambit of our client selection and credit
underwriting processes while zealously guarding credit qualities.

SME Business:

The end of year 2016 saw the Indian economy experiencing the demonetization exercise, which had
significantly impacted the small and medium enterprises. Your bank, nevertheless, has emerged
unshaken from the flux, achieving a growth of 18% in the SME Segment.

Retail Business:

The low-cost CASA segment reached Rs 31837.63 Cr, up by 24%. Resident Savings deposit of your Bank
has registered a growth of 29 % Y-o-Y to reach a figure of Rs14448 Cr. The total Resident Retail liability
book reached a figure of Rs. 47690 Cr being 49 % share of total deposits.

The Retail loan book of the Bank grew by 27.08% reaching Rs 21794 Cr, forming 29.41% of the total
advances of your Bank. Housing loans continue to be the major component of the retail loan book, with
a 50% share. During the year the Housing Loan portfolio increased to Rs 9104 Cr, registering a growth of
15.6%.

Inward Remittances:

The year also witnessed decent growth in the inward personal remittances handled by the Bank. Your
bank was instrumental in bringing in Rs.62500 Crore to India, representing about 15% of the total
personal remittances received by the country. Your Bank started 6 new Rupee remittance tie ups during
FY 17, of which 4 are from GCC and 2 are from Non GCC locations. All Rupee remittance arrangements
from Non GCC countries have online remittance option.
Shareholding Pattern:

The majority of the stake is with foreign institutions, this signifies that the foreign institutor keep a
regular check on the performance and results of Federal Bank and can also influence critical decision
making with respect to growth and expansion.