Federal Bank net up 25% on improved margins

Net interest margin went up 35 basis points to 3.59%, sequentially, due to healthy growth in low-cost deposits

Private sector lender Federal Bank on Tuesday reported 24.9 per cent increase in net profit to a Rs 227.3 crore for the quarter ended March, mainly on account of healthy growth in net interest income and improvement in margins.

Net interest income, or the difference between the interest earned and interest expended, was up 30 per cent in the end of the fourth quarter, at Rs 625.08 crore, as compared with Rs 479.76 crore in the same period last year. Net interest margin went up 35 basis points to 3.59 per cent, sequentially, due to healthy growth in low-cost deposits. The share of current and savings account deposits or the low cost deposits increased to 33.82 per cent as on March end, as compared with 33.47 per cent in December.

The lender has also improved credit quality which also boosted the earnings with the gross non-performing assets (NPA) declining to Rs 1,087 crore in the January-March quarter from Rs 1,201 in the previous quarter. Net NPA ratio declined by 12 basis points from 0.86 per cent in the December quarter to 0.74 per cent in end March.

Provisions (other than tax) and contingencies came down to Rs 55 crore at the end of the March quarter, from Rs 93 crore in the same period last year.

The bank also sold Rs 153 crore of bad loans to asset reconstruction companies during the quarter.

Shyam Srinivasan, CEO & MD, said this was the highest ever profit recorded by it in any quarter.

“We have trimmed large corporate loan book by Rs 5,000 crore to Rs 14,000 crore by the end of the last financial year,” Srinivasan said. The overall loan book of the bank shrunk due to trimming of large corporate loans.

However, the bank continued to grow loans to small and medium enterprise (SME) and the retail business. The SME business grew 36 per cent in the March-ended quarter whereas the retail arm growth picked up by six per cent in the same period.