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Informist, Tuesday, Jan. 28, 2025

MUMBAI – Federal Bank aims to maintain its net interest margin at the level seen in Oct-Dec, Managing Director and Chief Executive Officer K.V.S. Manian said in a post-earnings call with analysts on Tuesday. 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. 

"We have a significant book which is floating rate, so I would not commit myself on the front foot. I will watch the ball and play...all the work which we are doing to grow average current account and saving account will continue to help us offset the effect if the rate drops...I'm sure all of this will add up and help us try and maintain the NIMs around the current level," Manian said. He added that the bank is pleased that it has been able to maintain margins at these levels despite the rise in cost of deposits. 

The bank aims to maintain credit cost in the 0.4–0.45% range for the rest of the current financial year and aims to keep it around 0.4% in the long run, Manian said. 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. 

Speaking on the rise in cost of funds for the bank, Manian said, "We cannot change the cost of funds quickly. This is directional. These efforts will show results, I am sure, over the medium term. So, I think the impact may not show now, but we are confident that over a period of time it will show." Cost of funds for the bank was at 6.01% in Oct-Dec, up from 5.93% a quarter ago. 

Manian declined to give any guidance on the capital raising plans of the bank, saying that the current year's net profit when added to the current level now, should be a good number. Federal Bank's Basel III capital adequacy ratio was 15.16% as on Dec. 31.

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 on Monday reported a bottom line of INR 9.55 billion for Oct-Dec, down 5.1% on year. The net profit was lower than analysts' expectations of a 2% increase.  

On Tuesday, shares of the bank ended 3.7% lower at INR 184.10 on the National Stock Exchange.  End

Reported by Kabir Sharma

Edited by Tanima Banerjee

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