Federal Bank Q1 Net Profit Jumps 37 Pc on Core Income Growth, Improved Asset Quality

South-based Federal Bank on Friday reported a 36.78% jump in consolidated net profit for the June quarter at ₹1,256,09 crore on a healthy rise in core income and asset quality improvements.

The private sector lender's core net-interest income grew 26% to ₹2,946 crore on a 15% on-year jump in advances.

The bank's net interest margin increased to 3.33% from 2.94% in the year-ago period.

Its managing director and chief executive K V S Manian told reporters that the credit growth has been strong in the first quarter of the fiscal, and the bank may look at revising up its stated guidance.

He also said that the bank is aiming for a 0.05% expansion in the Net Interest Margin (NIM) every quarter, but refrained from mentioning when it will touch the 4% mark.

The bank's other income stood at ₹1.04 crore for the quarter.

The bank has undertaken a few transactions under the limited-period FCNR(B) window, Manian said, adding that the exact picture will be disclosed only after the scheme ends in September.

Additional credit growth will depend on the demand in the economy, and the FCNR(B) funds will not have a direct bearing, he said. It may help bring down reliance on bulk deposits, but 85% of the bank's deposits are retail in nature, Manian added.

It is offering leverage of up to 8-12 times to customers, Manian said, adding that he expects more business to come out of its stronghold of the Middle East, Singapore and Hong Kong, while other major markets will not offer such good business because of the tax laws there.

"We have a decent market share in the FCNR(B) business. We will try to keep our market share. We will have a fair share under the scheme," Manian said.

From a credit growth perspective, it will be cautious on micro loans given the challenges presented by the scant rains, Manian said.

He said the remittance flows have moderated after jumping in the initial phase of the West Asia conflict, but added that the war has not had any other major impact on the bank, which has chosen to be cautious on certain segments like business banking in the immediate aftermath of the war.

The fresh slippages came down to ₹409 crore for the quarter against ₹658 crore in the year-ago period.

The gross non-performing assets ratio improved to 1.52% as on June 30, from 1.91% in the year-ago period.

The bank management said that there will be a one-time impact of up to 2% of the networth as on March 31, 2027, while transitioning to the newer expected credit loss based system of provisioning, which sets in from April 1.

The overall capital adequacy stood at 16.97% at the end of June.

Manian said the bank, which recently announced a deal to acquire portfolios of Standard Chartered, is ready for more such buys but does not have a preference between 'portfolios' or 'entity-level' buys.