Federal Bank Q1 profit rises 17% to Rs 1,027 cr on loan recoveries; NRI flows help deposit growth

Mumbai: South India-based Federal Bank on Wednesday reported a 16.74 per cent growth in consolidated net profit to Rs 1,027.51 crore for the June quarter, helped by higher recoveries from written-off accounts.

The private sector lender's net profit grew to Rs 1,009.53 crore on a standalone basis, up from Rs 853.74 crore in the year-ago period.

Its core net interest income moved up 19 per cent to Rs 2,292 crore during the reporting quarter on the back of a nearly 20 per cent growth in advances, while margin moderated to 3.16 per cent from 3.21 per cent in the preceding March quarter.

Federal Bank Managing Director and Chief Executive Shyram Srinivasan, who will be demitting office in September after being at the helm for 15 years, told reporters that the bank is aiming to keep the net interest margin (NIM) between 3.15 and 3.25 per cent.

The bank is aiming to keep all credit costs at 0.30-0.35 per cent, he said, adding that the bank is not focused on looking at the NIM number in isolation, but wishes to look at the broader profitability wherein the credit costs incurred are also important.

On the deposits front, it was able to post over 19 per cent growth, ensuring that the gap between credit and deposit growth is minimal.

Srinivasan attributed the healthy deposit growth to a reversal of a two-year trend of muted growth in non-residents' deposits, while its Executive Director Shalini Warrier said the NR deposits have grown by 9 per cent in the quarter.

The other income grew 25 per cent to Rs 915 crore during the quarter, helping the overall profit growth. The line was driven by a 39 per cent growth in recoveries from written-off assets at Rs 227 crore, and Srinivasan said this is a very granular number without any chunky recovery.

The fresh slippages came at Rs 417 crore for the quarter, and the bank's gross non-performing assets ratio improved to 2.11 per cent.

The bank has grown the unsecured book at a higher rate on a lower base and the credit quality of the book is fine, Warrier said.

The bank's credit-deposit ratio stands at 81 per cent, Srinivasan said, adding that it works with the mantra of arranging the resources first or 'fund before you lend'.

It is working with the regulator on getting all things sorted on the co-branded credit cards front, Srinivasan said, adding that there should be a closure on it by the early third quarter.

The overall provisions were lower at Rs 144 crore, down from Rs 159 crore in FY24.

The bank's overall capital adequacy stood at 15.57 per cent and Srinivasan said that it will not require a fundraise for up to another 24 months.

The outgoing chief said the bank is doing well and hoped for the performance to continue under the new MD and CEO KVS Manian. He also declined to answer a query on leadership attrition following Manian's appointment, saying the bank has a solid team which is as excited about the opportunity ahead as the new head.

At present, the bank is the seventh biggest by assets, and is targeting to be the sixth biggest in the next two quarters, Srinivasan said.

The Federal Bank scrip closed 1.74 per cent up at Rs 201.45 apiece on the BSE on Wednesday, as against a 0.35 per cent correction on the benchmark.