Federal Bank Q1 Results: Profit Down 15% On Core-Income Challenges
For the quarter, its core net interest income rose by just 2% to Rs 2,337 crore.
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Federal Bank's net profit declined by 15% to Rs 862 crore in the June quarter as a compression in margins impacted core income and an uptick in bad assets led to higher provisions.
The bank management said that the second half of the fiscal year must see higher credit growth, and also an uptick in the net interest margins, and this was attributed to the industry-wide issues on the microfinance front for the uptick in non-performing assets.
For the quarter, its core net interest income rose by just 2% to Rs 2,337 crore. The other income was up 22%to an all-time high of Rs 1,113 crore on a surge in core fees and also a jump in treasury income. The private sector lender reported a credit growth of 9%, but the narrowing of NIM to 2.94% from the year-ago period's 3.16% impacted the core income growth the most.
Its managing director and chief executive K V S Manian said the NIMs will hit the bottom in the September quarter before rising to over 3% levels as deposits reprice, and added that its credit growth will accelerate to 12-13% levels with higher growth in the second half. The bank's fresh slippages were higher at Rs 658 crore, and were driven by higher contributions from the MFI book and also the seasonal stress in the agriculture portfolio.
A bank official hinted at a decrease in pain going forward, pointing that MFI slippages were the highest in the month of May, and have seen some decline in June and July. The overall provisions shot up to Rs 437 crore in April-June period, from Rs 173 crore which impacted the profits. The gross non-performing assets ratio inched up to 1.91% from 1.84% in the quarter-ago period.
From a loan growth perspective, MFI book grew 4%, commercial segment displayed a 30% jump, credit card was up 16% and corporate was up 4% as better rated companies preferred to raise money from bond markets.
Going forward, the bank expects the gold loan book to rise 25-30% and the busy season to ensure corporate exposure to grow by up to 10% for FY26. The bank's overall capital adequacy ratio stood at 16.03% with the core buffer at 14.69% as on June 30, 2025.
