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Informist, Saturday, Aug. 2, 2025

 

--Federal Bank: Don't see NIM dropping more than 5-10 bps in Jul-Sept 

--Federal Bank: Have enough levers to drive fee income higher 

--CONTEXT: Comments by Federal Bank mgmt in post-earnings analyst call 

 

By Priyasmita Dutta and Pratiksha

 

NEW DELHI – Given the current interest rate scenario, Kerala-based Federal Bank Ltd. does not see its net interest margin softening more than 5-10 basis points during the September quater, the bank's senior management said Saturday. The Reserve Bank of India's 50 bps rate cut in June will have an impact on margins in the current quarter, the bank's management said, adding that they are hopeful that by the end of the year margins will improve to around 3%. The private sector bank's net interest margin softened to 2.94% in the June quarter, from 3.12% in the March quarter and 3.16% in June quarter of last year. 

 

"We will see the full impact of rate cut which happened in June coming through in this quarter," the bank's management said in a post-earnings analysts concall. Financial results released Saturday showed that the bank's net profit for the quarter ended June fell nearly 15% on year as provisions for the quarter surged a little less than threefold. The fall in Federal Bank's Apr-Jun net profit on year and on quarter was the highest since 2015, data available with Informist showed. On Friday, shares of the bank closed at INR 196 on the National Stock Exchange, down 3.2%. 

 

While the surge in provisioning to mitigate weakening asset quality in the microfinance segment impacted the bank's bottom line, sans that, the bank's business was broadly steady. Federal Bank's top management voiced optimism and said the positive trends will continue throughout the year. Federal Bank's global advances and global deposits rose over 9% and 8%, respectively, to INR 2.45 trillion and INR 2.87 trillion as of Jun. 30.

 

The bank's total income during Apr-Jun was up 7.6% on year to INR 78 billion, buoyed by a 22% rise in its fee and other income. At a record INR 11.13 billion, the bank's fee and other income was up 11% sequentially. The bank's management said that it has "enough levers" to drive higher growth in fee and other income, a key aid to the bottom line. The bank drives fee income from loan processing, cards business, banking commissions and exchanges, general service charges, net profit on forex and derivatives transactions and para banking. 

 

Within the other income segment, Federal Bank's management also said that the pace of recoveries will continue in the upcoming quarters, and will not fall from the current levels. In the June quarter, the private sector bank's recoveries totalled INR 1.60 billion.  End

 

Edited by Deepshikha Bhardwaj

 

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