Federal Bank Q2 results: Profit jumps 35.5% as provisions fall

Mumbai: Private sector lender Federal Bank on Monday reported a 35.5% year-on-year jump in net profit at ₹954 crore in the September quarter owing to lower provisions.

While the lender's other income grew 20% year-on-year (y-o-y) to ₹730 crore, its net interest income --the difference between interest earned and expended-- grew 17% y-o-y to ₹2,056 crore in Q2 FY24. Its net interest margin, a key indicator of profitability, rose a mere one basis point sequentially to 3.16% as on 30 September. Its total provisions were at ₹371 crore, down 27% y-o-y.

“It was a good quarter and we did guide for performance getting stronger from Q1 into Q2 and we are pleased that we could deliver that. We hope to keep this momentum going into Q3 and beyond,” said Shyam Srinivasan, managing director and chief executive, Federal Bank. “The environment continues to be reasonably encouraging.”

Read HDFC Bank Q2 Results Live Updates here

Federal Bank’s asset quality improved as its gross bad loans as a percentage of gross advances stood at 2.26%, down from 2.38% in the June quarter and 2.46% in the September quarter of FY23.

The bank’s gross advances stood at ₹1.96 trillion as on 30 September, as against ₹1.64 trillion on 30 September 2022, registering a growth of 20%. While its wholesale book reported a growth of 17% y-o-y to reach ₹87,788 crore, aggregate retail loans were at ₹1.08 trillion.

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The bank’s total deposits increased 23% y-o-y to reach ₹2.33 trillion. Of that, Casa or current and savings account deposits reached ₹72,589 crore as on 30 September. Although total Casa deposits showed a growth of 5% over the same period last year, Casa ratio or Casa as a percentage of total deposits fell 524 basis points (bps) to 31.17% owing to a slower pace of growth than total deposits.

“On the credit side, we are seeing good and consistent demand across products and various offerings. It is no secret that the market has challenges in terms of incremental deposit growth as in the cost of deposit,” Srinivasan said, adding that deposits are available but the cost of growth of deposits is an issue that all banks are dealing with.

“Sometimes, it is a consequence of a high inflationary environment, global developments or more fundamentally how people are moving from bank deposits to other instruments.”

Shares of Federal Bank on the BSE fell 0.7% on Monday to close at ₹148.45 apiece.