Earnings Review
Tripling of provisions pulls Federal Bank PAT down after 13 quarters
This story was originally published at 22:46 IST on 27 January 2025
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--Federal Bank Oct-Dec net profit INR 9.55 bln
--Analysts saw Federal Bank Oct-Dec net profit INR 10.23 bln
--Federal Bank Oct-Dec net profit INR 9.55 bln vs INR 10.07 bln year ago
--Federal Bank Oct-Dec total income INR 77.25 bln vs INR 65.93 bln year ago
--Federal Bank Oct-Dec provisions INR 2.92 bln vs INR 912.20 mln year ago
--Federal Bank Apr-Dec net profit INR 30.22 bln vs INR 28.14 bln year ago
--Federal Bank Apr-Dec total income INR 225.12 bln vs INR 185.35 bln yr ago
--Federal Bank net NPA ratio 0.49% as on Dec 31 vs 0.57% qtr ago
--Federal Bank gross NPA ratio 1.95% as on Dec 31 vs 2.09% qtr ago
--Federal Bank Basel III capital adequacy ratio 15.16% as on Dec 31
--Federal Bk provision coverage ratio excluding write-offs 74.21% on Dec 31
--Federal Bank Oct-Dec NIM 3.11% vs 3.12% quarter ago, 3.19% year ago
--Federal Bank CASA ratio 30.16% on Dec 31 vs 30.07% qtr ago, 30.63% yr ago
--Federal Bank Oct-Dec net interest income INR 24.31 bln, up 15% on year
--Federal Bk Oct-Dec cost of deposits 5.92% vs 5.86% Jul-Sept, 5.73% yr ago
--Federal Bank Oct-Dec cost of funds 6.01% vs 5.93% Jul-Sept
--Federal Bank: Credit card loans up 24% YoY as of Dec 31 at INR 34.44 bln
--Federal Bank Oct-Dec fresh slippages INR 4.86 bln
By Kabir Sharma
MUMBAI – Federal Bank's net profit fell on year for the first time after 13 quarters in Oct-Dec as provisions of the bank more than tripled, compared with the corresponding period a year ago. The Kerala-based bank reported a bottom line of INR 9.55 billion, down 5.1% on year. The net profit was lower than analysts' expectations of the bank reporting a 2% increase.
Earnings from the bank were released post market hours. Shares of Federal Bank closed 1.6% higher at INR 191.14 on the National Stock Exchange on Monday.
Provisions of the bank rose 220.5% on year to INR 2.92 billion in Oct-Dec. Sequentially, provisions of the bank rose 84.6%, leading to a 9.6% on-quarter fall in net profit. The surge in provisions during the quarter was on the back of loan loss provisions rising to INR 3.43 billion.
The surge in provisions could be partly on behalf of a rise in the banks' credit cost. Credit cost of the bank almost doubled to 0.58% in Oct-Dec from 0.30% in the previous quarter and 0.31% year ago.
Provisions of the bank rose despite an improvement in asset quality. Gross non-performing asset ratio of the bank fell to 1.95% as of Dec. 31 from 2.09% a quarter ago and 2.29% a year ago. Net non-performing asset ratio of the bank fell to 0.49% on Dec. 31 from 0.57% quarter ago and 0.64% year ago. Provision coverage ratio of the bank rose to 74.21% as on Dec. 31 from 71.08% year ago.
Fresh slippages of the bank were at INR 4.86 billion in Oct-Dec, higher than INR 4.28 billion in Jul-Sept and INR 4.79 billion in the corresponding quarter of last year.
The fall in profit was despite the bank recording its highest ever net interest income--the core income of the bank--of INR 24.31 billion in Oct-Dec, which was up 15% on year. Although the bank saw the highest ever net interest income in Oct-Dec, the net interest margin of the bank fell to 3.11% in Oct-Dec from 3.12% in Jul-Sept and 3.19% in the year-ago period.
The moderation in margins can be attributed to the rising cost of deposits. Cost of deposits rose to 5.92% in the Oct-Dec quarter from 5.86% in Jul-Sept and was significantly higher than 5.73% in the year-ago period. Mirroring the rise in cost of deposits, cost of funds for the bank rose to 6.01% in Oct-Dec from 5.93% a quarter ago and 5.80% a year ago.
Total income of the bank rose 17% on year to INR 77.25 billion. However, sequentially, the total income rose a mere 2% as other income of the lender saw a fall of 5% on quarter. Other income of the bank was at INR 9.16 billion for Oct-Dec.
Total advances of the bank rose to INR 2.38 trillion as of Dec. 31, up 15% on year. Credit card loans of the private lender rose 24% on year to 34.44 billion as on Dec. 31. Total deposits were at INR 2.17 trillion as of Dec. 31, up 10% on year. The low-cost current account savings account ratio of the bank was at 30.16% as on Dec. 31.
For Apr-Dec, the bank reported a net profit of INR 30.22 bln against INR 28.14 bln year ago. Total income for the nine-months ended December was INR 225.12 bln compared with INR 185.35 bln year ago. Federal Bank's Basel III capital adequacy ratio 15.16% as on Dec. 31. End
Edited by Akul Nishant Akhoury
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