Federal Bank Q3 net profit up 54% at Rs 803.61 cr, asset quality improves

Net interest income increases 27.14% year-on-year to Rs 1,956.53 crore in, says private sector lender

Federal Bank on Monday reported a 54 per cent jump in net profit in the quarter (Oct-Dec) of FY23, aided by a healthy net interest income (NII) that was shaped by strong loan growth.

The Kochi-based private sector lender’s profit after tax for Q3 FY23 stood at Rs 803.61 crore, compared to Rs 521.73 crore in the same period a year ago. It is the bank’s highest ever quarterly net profit.

NII increased by 27.14 per cent year-on-year (YoY) to Rs 1,956.53 crore, backed by advances growth of 19 per cent. Net interest margin (NIM) stood at 3.49 per cent in Q3FY23, up 19 basis points (bps) from last quarter and 22 bps from the year-ago quarter. The NIM of the lender is at a 35-year high.  

Provisions for bad assets came down in Q3 FY23 to Rs 198.69 crore, a 7 per cent drop from the year-ago quarter and 25 per cent sequentially. Gross non-performing assets (NPAs) were at 2.43 per cent at the end of Q3 FY23, the lowest in 21 quarters. Net NPAs stood at 0.73 per cent, an improvement of 5 bps over last quarter, lowest in eight quarters.

The lender saw Rs 398 crore of fresh slippages in the quarter, with a bulk of it (Rs 181 crore) coming from the retail portfolio, followed by the commercial credit book, and the agri portfolio.

The lender has reported a 19 per cent YoY growth in advances to Rs 1.71 trillion, driven by growth in small, medium enterprises (SME) book at 20 per cent; retail book at 18 per cent; corporate book at 19 per cent; and CV/CE book at 65 per cent.

On the other hand, deposits of the lender increased by 14.81 per cent YoY to Rs 2.01 trillion, with low-cost deposits growing by 7.19 per cent to reach Rs 68,967 crore at the end of Q3 FY23. Current Account Savings Account (CASA) as a percentage of total deposits for the bank stood at 34.24 per cent. The ratio has fallen by 244 bps over the same period a year ago as banks have been raising interest rates on term deposits to garner durable liquidity to fund high credit demand in the economy.

“An all-round strong operating performance has helped us deliver the highest ever quarterly profit of Rs 804 crore. Credit cost has improved on the back of continued strong asset quality, with gross NPA and net NPA at 2.43 per cent and 0.73 per cent, respectively. Broad based asset growth of 19 per cent, coupled with core revenue profile has yielded in higher ROA, currently at 1.33 per cent”, said Shyam Srinivasan, managing director and CEO of Federal Bank.