More Stories

Informist, Saturday, Apr. 26, 2025

By Kabir Sharma

MUMBAI – Slower-than-industry growth in loans and a slight contraction in the net interest margin are expected to weigh on Federal Bank's net profit for the March quarter, according to brokerages tracking the lender.

The Kerala-based lender is expected to report a 5% increase in its bottom line at INR 9.52 billion, according to the average of the estimates of 17 brokerage firms. On a quarterly basis, the net profit is projected to fall slightly. Shares of the bank have risen 5.6% from late January, when it reported its December quarter earnings. On Friday, the stock ended 2.7% lower at INR 196.49 on the National Stock Exchange. 

This will be the second quarter of earnings under new Managing Director and Chief Executive Officer K.V.S. Manian, following a dismal December quarter, when the bank reported a fall in its net profit for the first time in 14 quarters. 

The bank is scheduled to detail its earnings on Wednesday.

Brokerages expect loan growth to recover from the dip in the previous quarter but remain below industry peers. Total advances of the bank had risen to INR 2.38 trillion as of Dec. 31, up 15% on year. Total deposits were at INR 2.17 trillion as of Dec. 31, up 10% on year.

The net interest income of the bank is seen moderating in the March quarter from the record high level seen in the previous quarter, brokerages said. "NII growth will be slightly slower than average loan growth due to fall in yield on advances outpacing cost of deposits," YES Securities said in a note. "Consequently, NIM will be slightly lower sequentially." The net interest income--the core income of the bank--of INR 24.31 billion for Oct-Dec, was up 15% on year.

Although the bank saw the highest ever net interest income in Oct-Dec, the net interest margin fell to 3.11% in that quarter from 3.12% in Jul-Sept and 3.19% in the year-ago period. 

The bank is expected to have needed lower provisions in the March quarter due to accelerated provisioning in the previous quarter, brokerages said. Provisions of the bank had more than tripled in the December quarter to INR 2.92 billion on the back of loan loss provisions rising to INR 3.43 billion. Loan loss provisions were ligher than total provisions as there was a reversal from standard accounts worth INR 560.00 million. 

The bank's credit cost, which doubled to 0.58% in the December quarter from 0.30% in the previous quarter, is expected to moderate as an improvement in asset quality is projected by brokerages. The 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. The net non-performing asset ratio fell to 0.49% on Dec. 31 from 0.57% a quarter ago and 0.64% a year ago.

Kotak Institutional Equities said it "expects slippages at 1.3% of loans (INR 7.70 bln) driven by retail and MSME (micro small and medium enterprises)." 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 last year. 

The key discussion points in the earnings would be the possible impact of the rate cut on NIM over the next few quarters, brokerages said. The outlook on loan and deposit growth will also be a key monitorable, they said. 

Following are the Jan-Mar earnings estimates for Federal Bank based on reports from 17 brokerage firms in descending order by the estimate of net profit:

End

Edited by Avishek Dutta

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.