Federal Bank Q3 net up 25% at Rs 1,007 cr, to propose names for next CEO

Thrissur-based lender's asset quality slips, expects to recover slippages

Federal Bank said on Tuesday its net profit increased by 25 per cent year-on-year (YoY) to Rs 1006.74 crore in the third quarter of FY24 (Q3 FY24) due to strong growth in other income.

Sequentially, the private sector lender’s profit increased by 5.53 per cent from Rs 954 crore. The bank’s other income increased by 61.53 per cent to Rs 862.56 crore from Rs 534 crore in Q3 FY23.

The strong growth in other income was led by a sharp rise in the profit on sale of investments to Rs 154 crore from Rs 7 crore in Q3 FY23.

Net interest income rose 8.51 per cent (YoY) to Rs 2,123 crore from Rs 1956.53 crore in the year-ago period. The lender’s total income increased by 32.72 per cent to Rs 6592.66 crore from Rs 4967.25 crore.

The asset quality of the Thrissur-based lender slipped with gross non-performing assets (GNPA) inching up to 2.29 per cent as compared to 2.26 per cent in Q2 FY24. Net NPA stayed flat at 0.64 per cent across the time period.

In Q3 FY24, the bank saw fresh slippages worth Rs 479 crore as compared to Rs 398 crore in Q3 FY23 and Rs 365 crore in Q2 FY24.

“Out of the fresh slippages in the quarter, nearly Rs 70 crore came from one large account which is likely to see a recovery in Q4 FY24,” said Shyam Srinivasan, managing director and chief executive officer of Federal Bank.

Net interest margin dropped down to 3.19 per cent compared to 3.55 per cent in Q3 FY23, largely due to tight liquidity and high cost of deposit.

Deposits grew by 19 per cent (YoY) to Rs 2.39 trillion and credit rose by 18 per cent to Rs 1.99 trillion. The growth in deposits came from client money and not bulk money, said Srinivasan.

On account of a change in regulatory mandate, sequentially, the risk-weighted assets (RWA) of the lender rose by 7 per cent to Rs 1.81 trillion. Srinivasan said the RWA has moved up for all players because of the mandatory requirement from the RBI and the bank was not outside of the ordinary in this case.

The Reserve Bank of India (RBI) has increased risk weight on unsecured loans to moderate growth

Srinivasan said a formal search for his successor at the bank is underway. The bank is also looking at internal and external candidates and names will be sent to the RBI by April-end or early May.

The RBI has turned down Federal Bank’s request seeking a one-year extension for Srinivasan whose term ends on September 22, 2024.