Federal Bank Q1 profit up 39% to Rs 880 cr; Fedfina reconsidering IPO plan

Federal Bank on Thursday reported 38.77 per cent jump in June quarter consolidated net profit at Rs 880.12 crore, and guided towards growing its loan book by up to 18 per cent in FY24.

The private sector lender's profit in the year-ago period was Rs 634.22 crore, while the same for the preceding March quarter was Rs 953.91 crore. On a standalone basis, Federal Bank reported 29 per cent rise in net profit at Rs 854 crore.

Its core net interest income on consolidated basis increased 19.57 per cent to Rs 1,918.59 crore during the quarter on the back of a 21 per cent growth in advances and a 0.07 per cent narrowing in the net interest margin at 3.15 per cent.

Its other income came at Rs 732 crore as against Rs 453 crore in the year-ago period, with the core fee income growing to Rs 535 crore from Rs 441 crore.

Bank's chief executive and managing director Shyam Srinivasan told reporters that NIMs have been on a downward trajectory because of the rate hikes by RBI, and exuded confidence that the same will go up to 3.30 per cent in FY24.

The bank is targeting for a loan growth of 17-18 per cent for the fiscal year, Srinivasan said, pointing out that the levels of economic growth require bank credit to expand correspondingly.

On the asset quality front, the fresh slippages increased to Rs 496 crore as against Rs 444 crore in the year-ago period and Rs 436 crore in the quarter-ago period.

Srinivasan said the bank generally witnesses slippages of Rs 400-450 crore per quarter, but the same were higher in April-June because of Covid-19 restructured accounts slipping into non-performing assets (NPAs).

Retail slippages were Rs 254 crore, and a third of them were due to restructured assets slipping into NPA on the end of the moratorium, Srinivasan said. Its gross NPA ratio stood at 2.37 per cent as against 2.35 per cent in the March quarter.

At a time when concerns are being raised about the unsecured lending, Srinivasan said there is nothing to worry on its personal loan book and the bank will also grow the credit card outstanding by over 40 per cent because of the lower base.

Its overall capital adequacy stood at 14.72 per cent as of June 30, and Srinivasan said there is a plan to raise capital in FY24 which it is working on.

The bank has a shareholder approval to raise up to Rs 4,000 crore in core capital to fund book expansion, but is yet to take a call on the quantum and the route to be taken.

He said Fedfina, the non-banking lending subsidiary of the bank, is reconsidering its plans of coming out with an IPO and is growing well. Federal Bank, which owns 74 per cent in the lender, will continue to be a majority shareholder in it, Srinivasan said.

The Federal Bank scrip closed 5.51 per cent down at Rs 126.80 on the BSE on Thursday.