Federal Bank posted its highest ever quarterly profit of ₹954 crore in Q2 FY24, an increase of 35.54 per cent y-o-y on the back of 16.72 per cent growth in net interest income (NII) to a record high of ₹2,056.42 crore.

In the post-earnings call, MD and CEO Shyam Srinivasan said the bank has seen broad-based growth across loan segments, with the bank posting better performance in Q2 compared with the previous quarter.

Net advances grew 19.58 per cent to ₹1.9-lakh crore on the back of 18 per cent growth each in retail and business banking loans, 24 per cent in commercial banking loans, and 15 per cent in corporate advances.

Growing deposits

Deposits increased by 23.12 per cent to ₹2.3-lakh crore as of September 30. Within this, term deposits grew 33 per cent y-o-y, domestic savings deposits by 7 per cent, and NRE deposits by 14 per cent, Srinivasan said, adding that the high cost of incremental deposit growth continues to be a challenge.

The CASA ratio for the bank declined to 31.2 per cent from 36.4 per cent a year ago.

Despite the healthy deposit growth, NIM compression for the bank, which was faster for Federal Bank compared with peers, has stopped and instead saw a marginal up-tick this quarter, Srinivasan said.

He added that margins will continue to improve going forward, led by the bank’s focus on high-yield segments such as credit cards, personal loans, CV/CE, MSME, microfinance, and gold loans, and maintaining strong credit quality. NIM for the quarter rose to 3.16 per cent from 3.15 per cent in Q1, but was worse than 3.30 per cent a year ago.

The gross NPA of the bank improved to 2.26 per cent from 2.38 per cent a quarter ago and 2.46 per cent a year ago. The net NPA ratio of 0.64 per cent was also better than 0.69 per cent in the previous quarter and 0.78 per cent in the previous year.

The material improvement was led by lower incremental slippages, Srinivasan said, adding that the NPA ratios are the lowest for the bank in 8–9 years.

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