Federal Bank Q3 Results: Profit Up 25% On Higher Other Income

The Federal Bank Ltd.'s net profit rose 25% in the third quarter, beating analysts' estimates.

The private sector bank's standalone profit increased to Rs 1,006.7 crore year-on-year in the quarter ended December, according to an exchange filing on Tuesday. Analysts polled by Bloomberg had estimated a profit of Rs 934.8 crore for the three-month period.

Sequentially, the net profit rose 6%. Net interest income, or core income, for the bank grew 9% year-on-year to Rs 2,123.4 crore. Other income rose 62% year-on-year to Rs 863 crore.

The gross non-performing asset ratio stayed flat at 2.29%, as compared with 2.26% in the previous quarter. The net NPA ratio also stayed flat at 0.64% sequentially.

The bank's Managing Director and Chief Executive Officer Shyam Srinivasan said that the lender saw one account slippage, but is likely to recover fully in Q4.

Fresh slippages increased 31% quarter-on-quarter to Rs 479 crore.

Provisions for the quarter fell 54% year-on-year to Rs 91 crore. The provision coverage ratio, excluding technical write-off for the quarter, stood at 71.08%.

The current account-savings account ratio fell 361 bps YoY to 30.63%.

The net interest margin dropped 3 basis point QoQ to 3.19%.

Srinivasan said that the H2 FY24 NIM guidance is not playing through. This is mainly due to tight liquidity and deposit growth coming at a high price.

"Near-term margin impact is expected," he said.

Deposits grew 19% year-on-year to Rs 2.3 lakh crore and 3% sequentially.

Srinivasan also said that the deposit growth is mainly coming from client money as opposed to buying bulk from the market. In addition, the long-term guidance on return ratio remains intact.

The private lender's net advances witnessed an overall growth of 18% year-on-year to Rs 1.9 lakh crore. On a yearly basis, the retail book grew 24%, and business banking book grew 18%.

The bank's total risk-weighted assets grew 7% quarter-on-quarter to Rs 1.8 lakh crore.

Srinivasan said that the RWA has moved up for all players because of the mandatory requirement from the RBI and the bank was not outside of the ordinary in this case.

The capital adequacy ratio fell 48 bps sequentially to 15.02%.

Succession Planning

Responding to media queries, Srinivasan said that the Reserve Bank of India is not inclined to offer one-year extension for the role of managing director and chief executive officer.

As part of succession planning, the board will send new candidates' names to the regulator by April-end or early May, he said.

NDTV Profit previously reported that on Jan. 5, RBI asked the bank to submit at least two fresh names for the MD and CEO post.

Shares of Federal Bank were trading 2.16% lower at Rs 149.65 apiece, as compared with a 0.35% decline in the benchmark Nifty 50 at 1.28 p.m.