More Stories

Informist, Thursday, Jan. 23, 2025

By Kabir Sharma

MUMBAI – Federal Bank is set for a quiet quarter, with analysts predicting a muted year-on-year growth in its net profit for Oct-Dec on the back of a slowdown in credit growth. The Kerala-based bank is seen reporting a net profit of INR 10.23 billion for the quarter ended December, up 2% from a year ago, according to an average of estimates from 15 brokerages. The estimates for net profit for the quarter ranged from INR 9.24 billion to INR 10.98 billion.

While profit growth is seen muted in Oct-Dec, brokerages largely have a 'buy' rating on the private lender. Shares of the bank, which will declare its quarterly results on Monday, ended 0.3% higher on Thursday at INR 190.75 on the National Stock Exchange.

Credit growth is seen cooling to 15-17% at the end of December from about 20%. "The bank is likely to report loan growth of around 15% (growth trends slowing down) and deposits by around 15%," Kotak Institutional Equities said in a pre-earnings report.

Federal Bank's net interest income is seen growing 13.7% on year to INR 24.14 billion in Oct-Dec, according to the average of the estimates. "High-yielding products such as credit cards, personal loans, and microfinance are driving this expansion, supported by disciplined underwriting practices," Motilal Oswal Financial Services Ltd. said.

Exerting pressure on the bottom line will be lower non-interest income, with multiple brokerages predicting a fall in treasury gains. However, the bank's bottom line will be supported by proceeds from the sale of its stake in Equirus Capital. The bank is expected to use the one-off gain from the sale, completed in October, to make more provisions, according to Nuvama Wealth Management Ltd. Nomura Equity Research pegged sale proceeds at around INR 700 million. Emkay Global Financial Services Ltd. too sees Federal Bank making contingent provisions, which could keep "earnings growth reined in".

On the asset quality front, Federal Bank's numbers are likely to be steady, "with no lumpy slippages and with no major one-off impacts", Elara Securities (India) Pvt. Ltd. said. The brokerage, however, said the bank's recovery from the corporate account, which caused a major slippage in 2023-24 (Apr-Mar), will be a key monitorable. The bank saw fresh slippages of INR 4.28 billion in Jul-Sept.

The bank's net interest margin is expected to remain stable sequentially, brokerages said. In Jul-Sept, the net interest margin moderated slightly to 3.12% from 3.16% in Apr-Jun and Elara Securities expects a similar decline in Oct-Dec.

Analysts are also keen to see the bank's strategy going forward with K.V.S. Manian succeeding Shyam Srinivasan as the managing director and chief executive officer in September. In the post-earnings analyst call in October, Manian had said the bank needs to improve its margin "with the right control on credit costs". "My guess is there will be more work initially required on the income side than the cost side, but having said that I am still in my assessment stage, we will come back in a more concrete manner in the next quarter," Manian had said.

Following are the Oct-Dec earnings estimates for Federal Bank based on reports from 15 brokerage firms in descending order by the estimate of net profit:

End

Edited by Saji George Titus

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

Informist Media Tel +91 (22) 6985-4000

Send comments to feedback@informistmedia.com

© Informist Media Pvt. Ltd. 2025. All rights reserved.