Federal Bank Q1 PAT up 42% on strong income growth
Driven by strong growth in net interest income (NII) and fixed asset quality, Federal Bank It reported a net profit of INR 854 crore for the first quarter of FY24, an increase of 42 per cent year-on-year. Sequentially, profit after tax was less than Rs. 903 crore in the fourth quarter of FY23.
NII was up 20 per cent YoY at Rs 1,919 crore for the quarter, while Other Income was up 62 per cent at Rs 732 crore.
Bank net advances grew by 21% YoY to ₹1.8-lakh crore as of June 30, led by growth of 17% in retail loans, 18% in business bank loans, 22% in commercial bank loans and 20% in agricultural loans and 22 percent in corporate loans.
favorable fundamentals
On the earnings call, managing director and CEO Shyam Srinivasan said growth in advances was broad-based across geographies, products and consumer segments. Assuming credit growth of 13-14 percent for the banking sector in FY24, Srinivasan pegged loan growth to the bank at 18-19 percent for the full year, adding that the bank will continue to gain market share over the course of the year as fundamentals remain. suitable.
Federal Bank said overall consumption trends look strong, and the bank is expected to see 40-45 percent growth in credit cards given the small base and strong growth in the CV portfolio led by overseas demand, logistics growth and increased distribution.
NIM (Net Interest Margin) for the quarter was 3.15% compared to 3.31% a quarter ago, and 3.22% a year ago.
Srinivasan said NIM’s pressure was in line with the bank’s estimations due to slow re-pricing of deposits. Further, margins are seen to rebound faster than expected as the bank expects margins to rise by 5-7 basis points in the second quarter.
Restructured loans overdue
Of the total slippages of Rs 496 crore in the first quarter, about Rs 254 crore were from retail loans of which a third was from the restructured Covid book. This resulted in quarterly slippages for the bank 10 per cent higher than the average of Rs 400-450 crore. The bank witnessed loan redemptions and promotions worth Rs. 246 crore.
Higher slips deteriorated the bank’s overall NPA rate slightly to 2.38 percent as of June 30, from 2.36 percent in the previous quarter, but it was better than 2.69 percent a year ago. The net NPA rate of 0.69 percent was flat from the previous quarter, but improved from 0.94 percent a year earlier.
The bulk of the bank’s unsecured lending is to existing or pre-qualified customers, and portfolio quality is holding up, Srinivasan said, adding that credit costs are likely to remain near the first-quarter level of 41 basis points for the rest of the period. fiscal year, with the slip rate pegged at about one percent of the loan portfolio.
Bank deposits increased by 21 per cent on an annual basis to reach INR 2.2 crore at the end of June. Srinivasan said that while some challenges around deposit build-up may remain, significant credit expansion on a sustainable basis, for the industry as a whole, would ensure deposit growth is accelerated as well.
Saying that the plus deposit rate battle may not be as intense, Srinivasan does not foresee any “high-volume pricing challenges” for the bank.