Federal Bank Q2 profit jumps 45% to record Rs 1,386 crore

Net interest income (NII) rose 26% YoY to Rs 3,153 crore from Rs 2,495 crore, while net interest margin (NIM) improved 26 basis points to 3.32% at the end of the September quarter from 3.06% a year earlier.

“We had a very strong quarter underpinned by sustained momentum on the liability side, disciplined growth on the asset side and continued focus on fees as well as operating efficiency,” KVS Manian, managing director and CEO of Federal Bank, said during the post-earnings media call.

He added that while the mobilisation of FCNR deposits had some impact on margins, the bank remained confident of maintaining its NIM trajectory. “While, of course, the FCNR has some impact on the NIMs, we are quite confident of maintaining our trajectory on NIMs. So, we do not see it significantly impacting our NIMs,” Manian said.

On inorganic opportunities, Manian said the bank continues to evaluate opportunities across financial services. “We are looking at all opportunities in financial services, including core banking as well as universal banking opportunities. Like I said, we are constantly evaluating opportunities, but nothing just now to report,” he said.

The bank’s net advances grew 22% YoY to Rs 2.98 lakh crore at the end of the September quarter from Rs 2.45 lakh crore. Within the loan book, retail customer assets rose 18% YoY to Rs 79,714 crore from Rs 67,600 crore, while the corporate and institutional banking book increased 17% to Rs 1.05 lakh crore from Rs 89,312 crore. Commercial banking loans grew faster, rising 25% to Rs 32,780 crore from Rs 26,129 crore.

Total deposits increased 19% YoY to Rs 3.43 lakh crore from Rs 2.89 lakh crore, while retail deposits grew 16% to Rs 2.49 lakh crore. The bank continued to benefit from strong non-resident deposit mobilisation, with NRE deposits, which include FCNR deposits, rising 27% to Rs 1.09 lakh crore from Rs 86,055 crore.

Federal Bank mobilised Rs 14,922 crore of FCNR deposits under the RBI’s special window during the period. It also had Rs 9,438 crore of loans against FCNR deposits at the end of September.

Asset quality improved sharply during the quarter. The gross non-performing asset ratio declined 51 basis points YoY to 1.32% from 1.83%, while the net NPA ratio fell to 0.17% from 0.48%. The provision coverage ratio, excluding technical write-offs, improved to 86.78% from 73.45%.

Fresh slippages declined to Rs 420 crore from Rs 579 crore a year earlier, a fall of about 28%, while the annualised slippage ratio improved to 59 basis points from 94 basis points. Total provisions, including tax, rose 22% YoY to Rs 839 crore from Rs 689 crore, even as credit cost declined to 31 basis points from 50 basis points.