KOCHI: Federal Bank reported its Q3 FY24 financial performance, with net profit declining 5 per cent year-on-year (YoY) to Rs955.4 crore, falling short of market expectations.
Despite the dip in profitability, the bank’s net interest income (NII) increased 14.5 per cent YoY to Rs2,431.3 crore, slightly surpassing the market expectations.
Improvement in asset quality
The bank demonstrated significant improvement in asset quality, with its gross non-performing assets (NPA) declining to Rs4,553.3 crore from Rs4,884.5 crore in the previous quarter. Similarly, net NPA dropped to Rs1,131.2 crore from Rs1,322.9 crore quarter-on-quarter (QoQ).
The gross NPA ratio improved to 1.95 per cent from 2.09 per cent in Q2 FY24, while the net NPA ratio fell to 0.49 per cent from 0.57 per cent. In its stock exchange filing, the bank highlighted that this was its best asset quality performance in over a decade, attributing it to a robust risk management framework.
However, provisions surged to Rs292.33 crore, a sharp rise from Rs158.35 crore in Q2 FY24 and Rs91.22 crore in Q3 FY23. The provision coverage ratio (PCR) stood at 74.21 per cent.
Strong growth in core business
The bank reported healthy growth across key metrics, reflecting strong business momentum. Total deposits rose 11 per cent YoY, while net advances saw a 16 per cent YoY increase.
The bank’s average CASA (current account savings account) grew by 11 per cent YoY, demonstrating a focus on stable and low-cost deposits. Additionally, credit card business witnessed robust growth, registering a 24 per cent YoY increase.
KVS Manian, Managing Director and CEO of Federal Bank, described Q3 as a pivotal quarter for the lender. “We have strategically reoriented both the asset and liability sides of our balance sheet, addressing fundamental aspects to position the bank strongly for the future.”
By prioritising granular retail deposit growth over high-value, expensive deposits, and consciously avoiding low-yielding or high-risk assets, the bank achieved YoY growth of 15 per cent in advances and 11 per cent in deposits, positioning the bank competitively within the sector.
Accelerated provisioning
Manian also highlighted the bank’s commitment to maintaining strong asset quality, which reached its best levels in a decade. “In line with our commitment to building a robust foundation, we undertook accelerated provisioning for certain riskier asset classes this quarter,” he said.
He said the bank remains focused on creating a high-quality franchise that delivers enduring value to all stakeholders – through superior customer service, an enhanced employee proposition, and consistent earnings quality.
Looking ahead, he expressed optimism about future opportunities and the bank’s ability to deliver sustainable value for stakeholders.
