Captain Speaks     

Published: November 30, 2023
Updated: November 30, 2023

Federal Bank

‘Double-digit spurt in profit in H1FY24’

The operating expenses increased 25% to Rs 2,811.04 crore, while provision and contingencies dipped 54% to Rs 199.48 crore, allowing profit before tax to increase 39% to Rs 2,427.32 crore in H1FY2024. The cost-to-income ratio deteriorated to 51.7% in H1FY2024 compared to 50.6% in H1FY2023. An effective tax rate was flat at 25.5% in H1 FY2024 compared to 25.5% in H1FY2023. Net profit has increased 39% to Rs 1,807.56 crore in H1FY2024.

Pointing out that “the bank has exhibited marginal improvement in margins in Q2 FY2024 over Q1 FY2024, while the bank expects margins to further improve in the second half FY2024 we expect the full year’s margin at 3.25 per cent for FY2024. We are confident of sustaining the bank’s growth of 18-20 per cent for the whole year.”

ALL INDICES UP

Analysing the performance during Q2 FY2024, Mr. Srinivasan said that the bank has reported a robust 36% surge in net profit at Rs 953.82 crore for the quarter ended September 2023 (Q2FY2024). The bank has posted a healthy 17% growth in net interest income (NII), while the core fee income of the bank also improved 30% in Q2FY2024. The Net Interest Margin (NIM) of the bank improved on a sequential basis to 3.16% in Q2FY2024 from 3.15% in Q1FY2024, while it eased from 3.30% in the corresponding quarter of the previous year.

On the business front, the bank has posted a 21% growth in business with a strong 20% surge in the loan book. The asset quality of the bank has further improved. The recoveries and upgrad ations of NPAs stood at Rs 359 crore, while the write-off of loans was at Rs 13 crore in Q2FY 2024. The standard restructured loan book of the bank declined to Rs 2,420 crore at end-September 2023. The provision coverage ratio improved to 71.03% at end-September 2023 compared to 70.02% a quarter ago and 67.41% a year ago. The capital adequacy ratio of the bank stood at 15.5% with the Tier I ratio at 13.8% at endSeptember 2023.

Referring to deposits, he said the CASA deposits of the bank rose 5% YoY to Rs 72,589 crore at end-September 2023. The current account deposits increased 26% to Rs 14,182 crore, while saving account deposits rose 1% to Rs 56,672 crore at end- September 2023. The CASA ratio de clined to 31.2% at end-September 2023 compared to 36.4% at end-September 2022. The term deposits have increased 31% to Rs 1,60,279 crore at end-September 2023. Core deposits accounts for 97.87% of total deposits. NRE term deposits are up by 10% YoY at end- September 2023. The bank has posted a record high quarterly net profit and net interest income in Q2FY2024. RoA and RoE continued to trend higher.

According to Mr Srinivasan, the bank has completed significant capital raising in Q2FY2024, which would help pursue growth opportunities. The asset quality of the bank is well under control, driven by improved risk management practices. The environment continues to be challenging, but the bank has made good progress on all counts. The bank aims to grow both deposits and a good-quality loan book. The fee income trend is encouraging and the bank aims to move from pure lender to a banker with a focus on better risk-rated clients. The share of fee income has increased to more than 1% of assets.