MUMBAI: Kochi-headquartered mid-sized private sector lender Federal Bank has reported a muted set of earning numbers in the March quarter with net income from core operations coming in only around 34% of the total reported Rs 1,259 crore, as against Rs 1,030 crore booked in the year-ago quarter as the remaining Rs 686.31 crore is accounted for a tax refund.
Despite this, the bank management led by chief executive KVS Manian claimed during the earnings call Wednesday this is the highest-ever quarterly net profit for the bank and the same would have been the highest ever even without this 66% one-off boost.
The sixth largest bank had a whopping Rs 686.31 crore refund from the income tax department during the quarter. This refund was for the assessment years 2011-12, 2012-13, and 2013-14.
Together with the tax refund, profit grew 22% on-year, partly aided by higher core income that soared 56% on the back of cost reduction. Barring these two core metrics the bank had a muted set of numbers.
Net interest income rose 56% to Rs 3,173 crore in spite of muted lending that grew only 6% but that was taken care of by a massive 62 bps jump in net interest margin, which printed in at 3.74% in the reporting quarter from 3.12% in the year ago period and 65 bps reduction in cost of funds.
The margin expansion was aided by cost reduction and a robust Casa which printed in at nearly 33%, up 271 bps in the quarter, executive director Venkataraman V said, adding there was also a 65 bps reduction in cost of funds as the bank retired a lot of higher priced wholesale deposits and consciously focused more on retail deposits, which resulted in cost of funds coming down to 5.46 from 6.06%.
Asset quality improved marginally with net NPAs coming in at 0.22%, improving from 0.44% and gross NPA improving to 1.62% from 1.84%.
Deposits grew to Rs 3.13 trillion in Q4 from Rs 2.83 trillion, of this 32.94% was Casa deposits rose by 271 bps from 30.23. Advances rose to Rs 2.72 trillion from Rs 2.47 trillion mostly led by gold loans.
“We’ve been defocussing on home and auto loans as both these asset classes are priced too competitively that we don’t find it no longer attractive enough. Going forward also unless pricing become better yielding we don’t push ourselves into those asset classes,” Manian said.
The bank has not seen any stress on its gold loan or rapidly growing credit card books, executive director Harsh Dugar said, adding the average loan to value ratio is only 54 as again the regulatory cap of 75.
On impact of the Iran war on remittances, where the bank leads in the home state of Kerala, Virat Diwanji, head of retail banking, said on the contrary there was an increase in inflows especially larger pay-ins since the war began.
The bank will be adding 100 more branches in FY27 on the back of 23 last fiscal.
