Federal Bank reports best-ever net profit in Q2 as provisions decline sharply

Mumbai: Private sector lender Federal Bank on Monday reported a 36 per cent jump in its September quarter net profit at Rs 994 crore on a consolidated basis, as provisions declined sharply.

On a standalone basis, the South-based lender reported a 36 per cent jump in its profit after tax at Rs 954 crore.

Its core net interest income grew 17 per cent to Rs 2,056 crore for the quarter on the back of a 20 per cent growth in advances and a slight expansion in the net interest margin to 3.16 per cent.

The other income came in at Rs 730 crore in the quarter under review, as against Rs 610 crore in the year-ago period, but was down when compared with the quarter ago period's Rs 732 crore.

Its overall provisions decreased to Rs 43.9 crore on a standalone basis, compared to Rs 267.86 crore in the year-ago period, majorly on a heavy reduction in the money set aside for potential loan losses, which came down to Rs 61 crore, from Rs 205 crore.

For the reporting quarter, the gross non performing assets ratio improved to 2.26 per cent, from 2.38 per cent three months ago and 2.46 per cent in the year-ago period.

Its chief executive and managing director Shyam Srinivasan said this is the best asset quality in the last 8-9 years, and attributed the improvement to lower fresh slippages at Rs 365 crore from Rs 496 crore in the quarter-ago period and Rs 375 crore in the year-ago period.

As a proportion of fresh slippages, retail contributed Rs 194 crore, Rs 54 crore came from agriculture and Rs 68 crore from commercial vehicle and construction equipment loans.

At a time when a majority of the system is facing challenges on the deposit growth front, the bank was able to increase its book faster than credit at 23 per cent, courtesy a handsome growth in term deposits.

Srinivasan said 98 per cent of the deposits came from customers, but added that garnering deposits at the best price will be a challenge going forward, as the entire banking system jostles to enlarge its liabilities.

Srinivasan said the bank will focus on high-yielding assets like microfinance, personal loans and credit cards going forward to expand the margins in the second quarter.

He said as of now, it does not see any challenges from the unsecured lending book as it has been sticking to existing customers to grow its book.

Its capital adequacy ratio improved to 15.50 per cent as of September 30, on the back of a capital raising done recently.

The bank scrip closed 0.70 per cent down at Rs 148.45 a piece on the BSE on Monday, as against a 0.17 per cent correction on the benchmark.