Federal Bank Q2 net profit up 53%, asset quality improves; stocks jump

The Federal Bank announced on Friday an increase of about 53% in its autonomous net profit for the second quarter ended September 2022 or the second quarter of fiscal year 23 to 703.7 crore compared to 460.3 crores from the prior year quarter. Federal Bank shares were trading more than 3% higher at 128 each on BSE in the afternoon tenders.

Meanwhile, the lender’s net income interest (NII), which is the difference between interest earned and interest spent, increased by about 19% to 1,762 crores of 1,479.4 crore year-on-year (YoY). On the other hand, its net interest margin (NIM) improved to 3.30%, up 10 bps YoY and 8 bps QoQ.

The Federal Bank’s asset quality also improved, with gross non-performing assets (NPA) rising to 2.46% from 2.69% in the prior quarter. While its net NPA fell to 0.78% from 0.94% QoQ. The bank said its gross NPA at 2.46% was the lowest in 24 quarters and its net NPA was the lowest in 34 quarters.

His provision and contingencies amounted to 267.8 crores of 166 crore on a sequential basis, however, down from 292 crores in the September 2021 quarter. Meanwhile, its capital adequacy ratio (%) under Basel III stood at 13.84% compared to 14.57% QoQ and 14.97% YoY.

Earlier this month, the bank released an interim business update for the quarter ending September (Q2 FY23). Federal Bank total deposits in the second quarter grew at a relatively slower pace of 3.16% sequentially, with current and savings accounts (CASA) deposits growing 2%. Gross advances grew 6.2% quarter-on-quarter (QoQ) in the second quarter, comparing favorably to 4.6% growth in the first quarter. Year-over-year (yoy), advances were up 19%.

Effective October 1, the Federal Bank has raised interest rates on savings bank deposits in various compartments, but still has a significant gap to close from the Reserve Bank’s repo rate hike path of India (RBI).

Federal Bank stocks have outperformed in 2022 as the banking stock has gained more than 49% year-to-date, versus a roughly 2% decline in the benchmark BSE Sensex.

Catch all the trade news, market news, breaking news and latest updates on Live Mint. Download the Mint News app to get daily market updates.

More less

Michael J. Birnbaum