Federal Bank bets on ‘heavy' organic expansion

Federal Bank is betting on organic growth and strengthening of its core to grow its business and is not actively scouting for acquisitions, said Mr Shyam Srinivasan, Managing Director & CEO.

The old generation, Kerala-based private sector bank wants to be a 1,000-branch bank by June. Currently, it has 835 branches.

Besides its home turf of Kerala, the five focus markets where it is planning to increase its footprint are Tamil Nadu, Gujarat, Punjab, Maharashtra and Karnataka.

“These five States have a big catchment of SME and NRI customers and these lines of business are the strength of Federal Bank. Our focus is really to serve these segments,” said the Federal Bank chief.

Ruling out any acquisitions for now, Mr Srinivasan emphasised that the bank's current journey is strengthening the core and “very heavy” organic expansion. It plans to add 200 branches every year to its network.

“We are not considering anything (acquisitions) now. However, if we get another bank like Ganesh Bank of Kurundwad (in Maharashtra), we will buy.

That decision was based on select, specific geographic expansion opportunities and made a lot of sense.

“We are very well capitalised and well provisioned. If something meaningful crops up in our strategic markets then the board will certainly look at it. But right now, nothing is on the horizon. Frankly, there are no opportunities,” explained Mr Srinivasan.

Business focus

The bank has identified Small & Medium Enterprises, non-resident Indians, risk management, footprint expansion, generating fee income and people as key focus areas.

“SME and NRI business are our big segment focus areas and we want to be putting a lot of effort and thrust on that. On both counts we are seeing progress,” said Mr Srinivasan.

Pointing out that SME customers with borrowings of Rs 20-30 crore are seasoned businessmen who have seen many cycles, the bank chief explained that they will weather the current downturn. These customers are good bets, he added.

Currently, SME advances account for 30 per cent of the total advances of Rs 33,000 crore.

On the NRI deposits front, Mr Srinivasan said his bank has seen a 40 per cent year-on-year growth in both customer and deposit base.

The bank is looking to expand overseas into Abu Dhabi, Dubai, Hong Kong–China corridor and Africa due to the presence of expatriate Indian population and business in these foreign lands.

Capital adequacy

“All my money is in Tier-I. We are at 15 per cent Tier-I capital adequacy. At the current pace of 20-22 per cent credit growth, we will not need capital for the next three years,” said Mr Srinivasan.