Federal Bank posted its highest-ever quarterly net profit of ₹804 crore for Q3 FY23. This was led by strong net interest income of ₹1,957 crore for the quarter. Sequentially, the net profit was 14.2 per cent higher.

The profit after tax was higher by 54.03 per cent year-on-year, led by an increase of 27.14 per cent in the NII. The net interest margin (NIM) for the quarter was 3.49 per cent, 22 bps higher on a year.

An all-round strong operating performance has helped us deliver the highest-ever quarterly profit of ₹804 crore. Broad-based asset growth of 19 per cent, coupled with core revenue profile, has yielded in higher ROA, currently at 1.33 per cent,” said MD and CEO Shyam Srinivasan.

In the post earnings call, Srinivasan said the bank had guided for 3.25-3.35 per cent NIM in FY23. While the Q3 NIM has been much higher due to the rate benefit, it will start to moderate from the coming quarter, he said, pegging FY23 NIM at “mid 3.30s”.

Federal Bank’s advances increased 19.08 per cent on year to ₹1.7-lakh crore, on the back of 18.1 per cent growth in retail advances, 19.7 per cent in agriculture advances, 18.0 per cent in business banking loans, and 18.4 per cent in commercial banking loans. Overall corporate advances were higher by 19.1 per cent at ₹62,183 crore as of December 31.

Srinivasan said he expects the loan growth momentum to continue in Q4 FY23, reiterating the loan growth guidance of 17-18 per cent for FY23.

Growth momentum is fairly robust and broad-based, and share gains for Federal Bank is “very possible,” he said, adding that deposit growth should also match credit growth for FY23. The bank has a market share of 1.26 per cent in advances and 1.12 per cent in deposits, as of December 31.

Fresh slippages for the quarter were ₹398 crore, partly off-set by recoveries and upgrades of ₹287 crore. The bank also wrote-off loans worth ₹8 crore during the quarter.

Gross NPA ratio for the quarter improved to a 21-quarter low of 2.43 per cent from 2.46 per cent a quarter ago and 3.06 per cent a year ago. The Net NPA ratio at 0.73 per cent was also better than 0.78 per cent in the previous quarter and 1.05 per cent the previous year.

Deposits of the bank rose 14.8 per cent per year to Rs 2.0 lakh crore. as on December 31, led by a 7.2 per cent increase in CASA deposits, which accounted for 34.2 per cent of total deposits.

Srinivasan said that deposit accretion will continue to be aggressive, which will lead to banks balancing between credit growth, deposit accretion and borrowing costs and methods best suited to support that growth.

“There is a certain degree of elasticity of price, and we are aware of that and we are very much in the market for that,” he said.

Basel-III-compliant capital adequacy ratio of the bank was 13.35 per cent at the end of December, with Srinivasan saying that the bank may look to raise some capital if the loan growth momentum continues to be robust.

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